1.

Explain the term Verification?

Answer:Verification means confirmation or proving the truth.Usually

it is concerd with assets and liabilities.
It signifies the physical examination of certain class of
assets and checking of arithmetical accuracy of assets and
liabilities.
Verification of assets includes an inquiry into the ownership
and title, existence and possession and the presence of any
change on the assets.
It is a process by which an auditor satisfies himself about
the accuracy of the assets and liabilities appearing in the
balance sheet by inspection of the documentary evidence
available.
It is done at the end of the accounting year.

2.What do you mean by the word charge or lien?

Answer:The auditor should ascertain whether the buildings are

subject to any charge or lien.
To verify this he should check Register of charges, loan
documents, minutes of Board or shareholders meeting etc

3.

Explain the term valuation?

Answer:Verification of assets also includes their proper valuation.
Correct valuation of assets and liabilities is very important
as the accuracy of the Balance Sheet depends on it.
Valuation of assets means determination of the fair value of
the assets shown in the balance sheet.
It does not mean putting the value of the assets owned by
the orgnisation as on the date of balance sheet.
It is a critical examination of the value of these assets.
The auditor should satisfy himself that the fixed assets have
been valued and disclosed in the financial statements
according to the genrally accepted principles of accounting.
He has to ensure that valuation of assets is based on
established practices which are in existence in the
business.

Distinguish between verification and valuation?

Points
Meaning

Time
By whom
Evidence

Verification
It establishes
existence,ownership
and acquisition of
assets.

Vouching
It certifies
correctness of
the value of
assets and
liabilities.
It is done at the end of
It done during
the accounting year.
the whole year.
It is done by the auditor It is by the
or his assistants.
proprietor.
Title deeds, receipts for Certificate given
payments constitute
by the proprietor
documentary evidence is the
for verification.
documentary
evidence for
valuation.