Importance of Verification and Valuation of Assets
Assets and liabilities are very important aspects of every business concerns. To show the exact financial position of the concern, one of the main work of an auditor is to verify the assets and liabilities. An auditor should satisfy himself about the actual existence of assets and liabilities appearing in the Balance Sheet is correct. If Balance Sheet incorporates incorrect assets, both Profit and Loss account and Balance Sheet will not present a true and fair view. So, verification and valuation of assets is very important for business and their importance is highlighted below.
Balance Sheet is prepared to show the actual financial position of a business. If proper valuation is not made, such Balance Sheet does not provide true and fair information. So, to provide information about the real financial position, verification and valuation of assets are essential.
Depreciation and other expenses on assets will be incorrect if proper valuation of assets is not made. So, to calculate the actual amount of profit or loss, proper valuation of assets and liabilities is necessary.
Proper valuation gives fair information about profitability and financial position of a business. So, people can get information which creates positive attitude towards company. The positive attitude of public can increase the goodwill of the concern.
Verification and valuation provide actual information about assets and liabilities to the shareholders which assure safety of their investment.
At the time of sale of the company, it can be sold at the price which is enlisted in the Balance Sheet, but the assets whose valuation is not made need valuation before selling the company.
Companies disclose the Balance Sheet proved by auditor for public knowledge which increases the trust of the company. Hence, companies can easily obtain loan from financial Institutions.
Whenever the loss occurs due to any incident, insurance company provides compensation on the basis of valuation of assets. So, the company can easily get compensation.