Verification: Meaning, Definition, Objectives

Verification

Meaning

Verification means the act of assuring the correctness of value of assets and liabilities in the organization. It refers to the examination of proof of title and their existence or confirmation of assets and liabilities on the date of Balance Sheet. It usually indicates verification of assets of any organization, which can be done by examination of values, ownership, existence, possession of any assets and also ensures that the assets are free from any charge. In simple words, verification means, ‘proving the truth or confirmation’.

Definition

Spicer and Pegler defines Verification as, “An inquiry into the value, ownership and title, existence and possession and the presence of any charge on the asset”.

J. R. Batliboi defines it as, “The auditor must satisfy himself that assets really existed at the date of the Balance Sheet and were free from any charge and that they have been properly valued”.

The Institute of Chartered Accountants of  India  defines  verification  as,  “It aims   at   establishing   (a)   existence, (b)    ownership,    (c)    possession, (d) freedom   from   encumbrances, (e) proper recording, (f) proper valuation”.

Objectives

The objectives of verification are as follows:

1.        To show the correct value of assets and liabilities.

2.        To know whether the Balance Sheet exhibits a true and fair view of the state of affairs of the business.

3.        To find out the ownership, possession and title of the assets appearing in the Balance Sheet.

4.        To find out whether assets are in existence.

5.        To detect frauds and errors, if any while recording assets in the books of the concern.

6.        To find out whether there is an adequate internal control regarding acquisition, utilization and disposal of assets.

7.        To verify the arithmetic accuracy of the accounts.

8.        To ensure that the assets have been properly recorded.

Auditor’s Duty Regarding Verification

The auditor of a business is required to report in concrete terms that the Balance Sheet exhibits a true and fair view of the state of its affairs. In other words, he has to examine and ascertain the correctness of the money value of assets and liabilities appearing in the Balance Sheet and this examination is known as verification of assets and liabilities. Therefore, an auditor has to keep in mind the following points while verifying the assets:

·     Ensuring the existence of assets.

·     Acquiring the assets for business.

·     Legal ownership and possession of the assets.

·     Ensuring the proper valuation of assets.

·           Ensuring that the assets are free from any charge.