UNI

T4Ver
if
icat
ionandVal
uat
ionofAsset
sandLi
abi
li
ti
es

Meani
ngandObjecti
vesofv
eri
fi
cati
onandv al
uati
onposi
tionofanaudi
torasr
egar
dst
hev
aluat
ionofasset
s
–veri
fi
cat
ionandval
uati
onofdi
ff
erentAssetsandLi
abil
i
ties

Meani
ngofv
eri
fi
cat
ionofAsset
sandLi
abi
l
iti
es

Ver
if
icat
ionmeans‘
prov
ingt
het
rut
h’or‘
conf
ir
mat
ionoft
rut
h’.

Ver
if
icati
onmeansest
abl
ishi
ngtheactual
exi
stenceoftheasset
sandliabi
l
iti
esappeari
nginthe
balancesheet,owner
shi
pandpossessi
onoftheasset
sandpr opercl
assi
fi
cat
ionandv al
uat
ionofasset
sand
l
iabil
it
ies.

Obj
ect
ivesofv
eri
fi
cat
ionofasset
sandl
iabi
li
ti
es

 Tof
indoutwhet
hert
heasset
sandl
i
abi
l
iti
esshowni
nthebal
ancesheetact
ual
l
yexi
ts.

 Toascer
tainwhet
hert
heasset
sandl
i
abi
l
iti
esappear
ingi
nthebal
ancesheetar
eshownatt
hei
r
cor
rectv
alues.

 Toconf
ir
mthepossessi
onandowner
shi
poft
heasset
sappear
ingi
nthebal
ancesheet
.

 Tof
indoutwhet
hert
her
eispr
opercl
assi
fi
cat
ionasset
sandl
i
abi
l
iti
es.

 Tocheckt
hear
it
hmet
ical
accur
acyoft
hebooksofaccount
s.

 Todet
ecter
ror
sandf
rauds,
ifanyi
nthebooksofaccount
s.

 Toascert
ainwhet
hert
hebal
ancesheetgi
vesat
rueandf
airv
iewoft
hef
inanci
alposi
ti
onoft
he
busi
ness.

Ver
if
icat
ionofAsset
s

Meani
ngofv
eri
fi
cat
ion

Accordi
ngtoSpicerandPegl
er“
verif
icat
ionofasset
simpli
esanenquir
yint
othev
alue,
owner
shi
p
andt
it
le,
exist
encepossessionandt
hepresenceofanychargeontheasset
s.

Ver
if
icat
ionofasset
sinv
olv
es

 Compari
ng:-Theledgeraccountsoftheasset
switht
hebal
ancesheetandsat
isf
yingt
hatal
lthe
asset
sint
heledgerandincludedinthebal
ancesheet
.

 Veri
fyi
ng:-Exi
stenceoft
heasset
sasonthedat
eoft
hebal
ancesheetbyphy
sical
ver
if
icat
ionorby
examinat
ionofdocumentar
yevi
dence.

 Enqui
ri
ng:-Enquir
ingi
ntot
heowner
shi
poft
heasset
sie.Sat
isf
yingt
hatt
heowner
shi
poft
heasset
s
l
ieswi
ththebusiness.

 Ensur
ing:-Thatt
heasset
sar
efr
eef
rom anychar
gessuchasmor
tgagepl
edgeorhy
pot
hecat
ion.

 Ensur
ingt
hatt
heasset
sacqui
redf
orbusi
ness.
  Sat
isf
ying:
-Theasset
sar
epr
oper
lyv
aluedaccor
dingt
otheaccount
ingpr
inci
ples.

Obj
ect
ives

 Physi
calExi
stence:
-Tofi
ndouttheexi
stenceoft
heasset
sasatt
hedat
eofbal
ancesheetei
ther
phy
sicalver
if
icat
ionort
hroughdocumentar
yevi
dence

 Ownershi
p:-t
of i
ndoutt
heowner
shi
pandt
it
leoft
heasset
sappear
ingi
nthebal
ancesheett
hrough
l
egaldocuments.

 Act
ualpossessi
on:
-Tof
indoutt
heact
ual
orconst
ruct
ivepossessi
onoft
heasset
sint
hebusi
ness.

 Tover
if
ythecharge:
-Toveri
fythewhet
hert
hechar
gesont
heasset
ssuchasmor
tgage.Pl
edgesar
e
pr
oper
lydecl
aredinbal
ancesheet.

 Veri
fytheclassi
fi
cat
ionofasset
s:-Tov
eri
fywhet
hert
heasset
sint
hebal
ancesheetar
epr
oper
ly
cl
assif
ied.

 Veri
fyt
hebalancesheetexhi
bit
satrueandf
air
:-Toascertai
nwhet
hert
hebal
ancesheetexhi
bit
sa
tr
ueandfai
rviewofthefi
nanci
alposi
ti
onoft
hebusiness.

 Det
ecter
ror
sandf
raudsi
nthebooksofaccount
s.

Audi
tordut
yinv
eri
fi
cat
ionofAsset
s

 Anaudit
orhastocer
ti
fyt
hatt
hebal
ancesheetexhi
bit
sat
rueandf
airv
iewoft
hef
inanci
alposi
ti
onof
thebusi
ness.

 Ver
if
icat
ionofasset
sint
hebal
ancesheeti
sani
mpor
tantdut
yofanaudi
tor

 Thi
sdut
yisal
soi
mposedbyanaudi
torbyt
hecompani
esact
.

 Ver
if
icat
ionmeannotonl
yver
if
yther
eal
exi
stenceoft
heasset
sbutal
sot
hei
rpr
operv
alue.

 Anaudi
tormustveri
fyt
heexi
stenceofphy
sical
exi
stenceofasst
sbydocument
aryev
idenceor
act
uali
nspect
ion.

 Hemustensur
ewhet
herasset
sar
eval
uedi
naccor
dancewi
thgener
alpr
inci
pleofaccount
ancy
.

 I
fanaudit
ordoesnotper
for
m hi
swor
kinv
eri
fi
cat
ionofasset
spr
oper
lyhei
sonl
yhel
dresponsi
ble
f
orthedamagesofhiscl
i
ent.

Ver
if
icat
ionofLi
abi
li
ty

Meani
ng

Itistheprocessbywhi chtheauditorsati
sfi
eshimselft
hatall
theli
abi
li
ti
esofthebusinessincl
uded
i
nt hebal ancesheett hatt
hereisnofict
it
iousliabi
li
ti
esincl
udedinthebal
ancesheet,thattheamountofthe
l
iabil
it
iesar ecorrectl
ydeterminedinaccordancewiththepri
ncipl
esofaccount
ancyandt hattheypr
operl
y
classi
fiedanddi sclosed.
Ver
if
icat
ionofl
iabi
li
ti
esi
ncl
udes

1.Compar
ing 2.Ensur
ing 3.Ascer
tai
ning 4.Ensur
ing

Obj
ect
ivesofv
eri
fi
cat
ionofl
iabi
li
ti
es

 Toveri
fytheact
ual
exi
stenceofl
i
abi
l
iti
esappear
ingi
nthebal
ancesheetbyor
igi
nal
document
ary
evi
dence

 Toensur
ethatal
lthel
i
abili
ti
esofthebusi
nessi
ncl
udi
ngt
hosenotr
ecor
dedi
nthebooksofaccount
s
ar
ediscl
osedint
hebalancesheet
.

 Toensur
ethatt
hel
i
abi
l
iti
esshowni
nthebal
ancesheethav
ebeeni
ncur
redf
ort
heoper
ati
onoft
he
busi
ness

 Toseet
hatal
lthel
i
abi
l
iti
esappear
ingi
nthebal
ancesheetar
epr
oper
lyv
alued.

 Toensur
ethatt
hel
i
abi
l
iti
esappear
ingi
nthebal
ancesheetar
epr
oper
lycl
assi
fi
ed.

Audi
tordut
yregar
dingt
over
if
icat
ionofl
iabi
li
ti
es

 I
tisnecessar
yforanaudi
tort
over
ifythel
i
abil
it
iestoensur
ethatt
hebal
ancesheetr
epr
esent
sthe
t
rueandfairvi
ewofthest
ateofaf
fair
softheconcern.

 I
mpor
tanceofv
eri
fi
cat
ionofl
i
abi
l
iti
esbyanaudi
torwi
thr
easonabl
ecar
eandski
l
lwasemphasi
zed.

 Heshoul
dseet
hatal
lthel
i
abi
l
iti
esoft
heconcer
nhav
ebeeni
ncl
udedi
nthebal
ancesheet
.

 Heshoul
dseet
hatnol
i
abi
l
iti
eshasbeenomi
tt
eduni
ntent
ional
l
y/i
ntent
ional
l
y.

 Heshouldseethatev
entheconti
ngentli
abi
l
iti
eshav
ebeenshownbywayoff
ootnot
etot
hebal
ance
sheetorshowninbal
ancesheeti
tsel
f.

 Heshouldseethatt
heamountsofal
ltheli
abi
l
iti
esshowni
nthebal
ancesheetar
ecor
rect
lyar
ri
vedat
i
naccordancewitht
heaccept
edaccounti
ngpri
ncipl
es.

 Thev
alueofl
i
abi
l
iti
esnei
therov
erst
atedofunderst
ated

 Heshouldal
sogetacert
ifi
cat
efrom someresponsi
bleof
fi
cial
soft
hecl
i
entbusi
nessast
o
cor
rect
nessoft
heli
abil
i
tiesshowninthebal
ancesheet.

 Heshoul
dseet
hatal
lthel
i
abi
l
iti
esent
eredi
nthebal
ancesheetr
elat
etot
hebusi
ness

 Heshoul
dseet
hatal
lthel
i
abi
l
iti
esar
epr
oper
lyaut
hor
izedbysomer
esponsi
bleof
fi
cial
s

 Heshoul
dseet
hatt
hel
i
abi
l
iti
esar
epr
oper
lycl
assi
fi
edanddi
scl
osedi
nthebal
ancesheet

 Heshoul
dseet hatt
hel
i
abi
l
iti
esshowni
nthebal
ancesheetr
efl
ectt
het
rueposi
ti
onoft
hel
i
abi
l
iti
es
oft
hebusiness.

Val
uat
ionofAsset
s
Meani
ng

Val
uat
ionofAsset
smeanst hedet
ermi
nat
ionorascer
tai
nmentoft
hemoneyv
aluesatwhi
cht
he
asset
sareshownintheBalancesheet
.

Theaudi
tor
’swor
ksofv
aluat
ionofasset
sar
e:

 Obt
ainmentofal
lthei
nfor
mat
ionav
ail
abl
einr
espectofv
aluat
ionofasset
s.

 Cr
it
ical
exami
nat
ionandanal
ysi
sofal
lthev
aluesofasset
s.

 Checki
ngoftheval
uesofthevari
ousasset
swhi
chhav
eal
readybeendet
ermi
nedbyt
heowner
sor
themanagementofthebusi
ness.

 Ver
if
yingwhethert
heval
ueoft
heassetsasshowninthebal
ancesheethav
ebeendet
ermi
ned
pr
operlyont
hebasisofnor
mal
lyaccept
edaccount
ingpri
nci
ples

 Ver
if
yingwhet
hert
hebasi
sofv
aluat
ionhasbeenconsi
stentf
rom y
eart
oyear
.

 Seeki
ngassist
ancefr
om t
echnical
personnel
,wherenecessar
yfordeter
mini
ngwhet
hert
hev
aluesof
theasset
s,asshownint
hebalancesheethavebeenproperl
yarr
ivedat.

Obj
ect
ivesofVal
uat
ionofAsset
s

 Tov
eri
fywhet
hert
heasset
sasshowni
nthebal
ancesheethav
ebeenpr
oper
lyv
alued.

 Toindi
cat
ethatt
hebal
ancesheetr
epr
esent
edat
rueandf
airv
iewoft
hest
ateofaf
fai
rsoft
he
busi
ness.

 Toi
ndi
cat
ethatt
her
eisnomani
pul
ati
onofaccount
stoi
nfl
ateort
oreducet
hepr
ofi
t.

Di
sti
nct
ionbet
weenv
eri
fi
cat
ionandv
aluat
ionofasset
s

Ver
if
icat
ionasset
s Val
uat
ionasset
s
Hewi ll
verifynotonl yactualexi
stencebutalsotheir Ensur ev alueofassetsinabalancesheet
propervalue
Iti
ncludev aluati
onal so Iti
sthepar tofveri
fi
cat
ion
Itcomesbef orevaluati
on Itf
ollowsv erif
icat
ion
Inthiscaseofaudi torisentir
elyresponsi
bleforthe Val uati
onwor kdonebyownerormanagement
wor k
Itcanbedonebydocument aryevidenceandphy si
cal Fewdi rectev i
denceasavail
ableonthebasi
s
exist
ence esti
mat esoft hemanagementorowner
Inthiscaseaudi torcangi v
eguarant eeoft
heasset s Hedoesnotgi veanyguar
anteeofanyasset
s

Audi
tor
’sdut
yinr
egar
dtov
aluat
ionofAsset
s

Val
uat
ionofanassetisadif
fi
cul
ttask.I
trequir
estechni
calknowl
edgenott
heti
merequir
edfort
he
val
uati
onofasset
s.Inshor
t,anaudi
tori
snotav aluer
,val
uati
onofassetsi
sdonebytheownerofthe
busi
nessanaudit
orjustmakeanenquir
yintothev al
uati
onofassets.

Tosat
isf
yhi
msel
fthatt
hev
aluesoft
heasset
sar
ecor
rect
,anaudi
torshoul
ddot
hef
oll
owi
ng:
  Heshoul
dobt
ainal
lthei
nfor
mat
ionav
ail
abl
einr
espectoft
hev
aluat
ionofasset
s.

 Heshoul
dcr
it
ical
l
yexami
neandanal
yzeal
lthef
igur
esoft
hev
aluesoft
heasset
s.

 Heshoul
dcr
it
ical
l
yexami
neandanal
yzeal
lthef
igur
esoft
hev
aluesoft
heasset
s.

 Heshouldver
ifyt
hev al
uesofasset
shav
ebeendet
ermi
nedpr
oper
lyi
naccor
dancewi
tht
he
account
ingpr
inci
ples.

 Ver
if
ythepr
inci
plesandpr
act
iceofv
aluat
ionofasset
shasbeenconsi
stentf
rom y
eart
oyear
.

 Wher
eev
ernecessar
yheshoul
dseekt
heassi
stancef
rom t
echni
cal
exper
tsf
orv
aluesofasset
s.

 Heshoul
dascer
tai
nthecur
rentv
aluesofasset
sar
efai
randr
easonabl
e.

Val
uat
ionofl
iabi
li
ti
es

Thequesti
onofval
uat
ionofl
iabi
l
iti
esdoesnotari
se,
becauset
heexactamountofv
ari
ousl
i
abi
l
iti
es
canbeeasi
l
ydetermi
ned.So,
li
abi
li
ti
esarenotval
uedli
keasset
s.

Ver
if
icat
ionandv
aluat
ionofdi
ff
erentasset
s

Ver
if
icat
ionandv
aluat
ionofFi
xedAsset
s

 Fr
eehol
dpr
oper
ty:
-LandandBui
l
dingabsol
utel
ythepr
oper
tyoft
hebusi
ness.Theyar
efi
xedasset
s.

Thef
oll
owi
ngpoi
ntsanaudi
tor
’smustf
oll
ow

 Heshouldexaminetheti
tl
edeedsr
elat
ingt
olandandbui
l
dingt
heyar
eint
henameofcl
i
entand
showninbalancesheet
.

 I
fanydoubtr
egar
dingl
andandbui
l
dingconsul
tthesol
i
cit
orsoft
hecl
i
ent
.

 I
flandandbui
ldi
nghavebeenpur
chasedheshoul
dexami
net
hecor
respondence,
deed,
broker
sor
aucti
oneer
saccount
s.

 Ifi
tisconst
ruct
edbyt
hecl
i
entt
heaudi
torshoul
daskf
ort
heexami
net
hear
chi
tect
sandbui
l
der
s
cert
if
ied.

 Heshouldseet
hatiflegal
expenses,
broker
ageandanyot
herexpensesar
eincur
redonacqui
sit
ionof
f
reehol
dproper
ty.Theyareal
socapit
ali
zed.

 Ifpr
oper
tylandandbui
ldi
ngaremort
gagedtheaudi
torshoul
dgetacer
ti
fi
cat
efr
om t
hemor
tgage
stat
ingt
hattheti
tl
edeedsar
einhispossessi
ons.

 Ther
eisnosecondmor
tgage.

 Ift
het i
tl
edeedsoft
heproper
tywithabankorasoli
cit
orf
orsafecust
ody,
theaudi
torshoul
dgett
he
cert
if
icatef
rom t
hebankorsol
ici
tori
tiskeptf
orsaf
ecustodynotf
oranyl
oan.

 I
fanyfreeholdlandsoldi
nthateart
heaudi
torshoul
dcheckt
hesal
eandseepr
ofi
torl
osscor
rect
ly
deal
tintheaccounts.
  Heshoul
dexami
net
headequacyoft
hepr
ovi
si
onf
ordepr
eci
ati
onont
hef
reehol
dbui
l
ding.

 Ifanyappr
eci
ati
oni
sthei
ritshoul
dcl
ear
lydi
scl
osedi
nthebal
ancesheetandobt
aincer
ti
fi
cat
eof
copy.

 Heshoul
dseet
hef
reehol
dlandandbui
l
dingsepar
atel
yment
ionedi
nbookofaccount
s.

 Heshoul
dseethatt
hel
easehol
dpr
oper
tyshowni
nthebal
ancesheetatcostl
essdepr
eci
ati
on
wr
it
tenofft
odate.

Ver
if
icat
ionandVal
uat
ionofPl
antandmachi
ner
y

I
nasmal
lconcer
nalt
hepiecesofmachi
neryasonei
tem.I
twon’
tmai
ntai
nsepar
ater
egi
ster
.Buti
na
l
argeconcer
nmai
ntai
nsepar
ater
egist
eraspl
antregi
ster
.

Fol
l
owi
ngpoi
ntsmustmai
ntai
nwhi
l
ever
if
icat
ionandv
aluat
ionofpl
antandmachi
ner
y

 Heshouldv
eri
fyt
hepl
antandmachi
ner
ypur
chasedwi
tht
heor
igi
nal
inv
oices,
wit
hagr
eementwi
th
vendor
s.

 I
fanyaddi
ti
onpl
antandmachi
ner
yist
hei
rdur
ingt
hey
earshoul
dver
if
ywi
thr
elev
anti
nvoi
cesor
document
s.

 Heshoul
dcheckt
hepl
antandmachi
ner
ymai
ntai
nregi
ster
.

 Heshoul
dcheckt
hepl
antandmachi
ner
yandsat
isf
yhi
msel
fwi
tht
hev
aluat
ionofpl
antand
machi
ner
y.

 I
fpl
antandmachi
ner
ykeptabr
oad,
heshoul
dgett
hecer
ti
fi
cat
efr
om t
hel
ocal
audi
tor
s.

 I
fanyol
dmachi
ner
ysol
dcheckt
hesal
epr
oceedsar
ecr
edi
tedt
othemachi
ner
yaccount
.

 Heshoul
dseet
hatr
epai
rsandrenewal
stothemachi
ner
yshoul
dnotbecapi
tal
i
zedi
tshoul
dbe
mai
ntai
nedi
npl
antandmachi
neryaccount
.

 Aspl
antandmachiner
yisafi
xedassetmeantforuseandnoti
ntendedf
orr
esal
etheaudi
torshoul
d
seet
hati
tisv
aluedatcostpr
icel
essdepr
eciat
ionwrit
tenof
ftodate.

Ver
if
icat
ionandVal
uat
ionofGoodwi
l
l

Goodwil
li
sthevalueoft
hereput
ati
onofabusi
nesswhichenabl
esthebusi
nesst
oear
nmor
ethan
t
henor
malr
ateofprof
it
.Goodwil
li
sthereput
ati
onofbusi
nessval
uedinter
msofmoney.

Theval
ueofgoodwi
lldependsupontheearni
ngcapacityoft
hebusiness.I
tincreaseswi
thr
isei
n
pr
ofi
tanddecr
easewit
hfal
li
npr ofi
t.Thatmeansgoodwi
llcannothaveper
manentv alue.

Anaudi
torshoul
dobser
vet
hef
oll
owi
ngpoi
ntswhi
lev
eri
fi
cat
ionandv
aluat
ionofGoodwi
ll

 Whenthegoodwi
l
lispurchasedal
ongwit
harunni
ngbusi
nessf
rom somev
endor
s,t
heamountof
goodwi
ll
shoul
dbev er
if
iedwitht
hepur
chaseagr
eement.

 Whent
hegoodwi
l
laccounthasbeenr
aisedbyt
hecompanybywr
it
ingupt
hev
alueofi
tsasset
son
 t
her
eval
uat
ionoft
hewhol
eofi
tsasset
sanshoul
dver
if
yaswhi
chasset
shav
ebeenr
eval
ued.

 Theamountofgoodwil
lcr
eat
edinapar
tner
shi
pfi
rm,
ont
headmi
ssi
on,
ret
ir
ementordeat
hofan
exi
sti
ngpar
tner
,heshoul
dver
if
ywit
hthedeed.

 Heshoul
dnoti
nter
facei
nmat
terofr
aisi
nggoodwi
l
l,buthemaygi
veadv
icet
orai
segoodwi
l
lamount
.

 Goodwi
l
lshoul
dbev
aluedatcostl
essamount
.

Ver
if
icat
ionandVal
uat
ionofI
nvest
ment
s

I
nvest
ment
sincl
udegov
ernmentsecur
it
ies,
shar
esanddebent
uresofj
ointst
ockcompani
eset
c.

Whil
eundert
akingt
hev
eri
fi
cat
ionandv
aluat
ionoft
hei
nvest
ment
s,anaudi
torshoul
dobser
vet
he
f
oll
owingpoi
nts.

 Heshoul
dcallf
orandexami
net
heschedul
eofi
nvest
ment
shel
dbyt
hecl
i
entbyr
efer
encet
othe
r
elev
antl
edgeraccount
s.

 Heshoul
dseet
hatt
hei
nvest
menthav
ebeenshowni
nbal
ancesheetdi
sti
nct
lyandpr
oper
ly.

 I
fthei
nvest
mentsareinthehandsofthecl
i
ent,t
heaudi
torshoul
dveri
fyt
heexi
stenceoft
he
i
nvest
mentbypersonali
nspect
ion.I
nonesit
ti
nghehavetocomply.

 I
ftheinv
est
mentshavebeenent
rustedi
nbankforsafecust
odyheshoul
dgetcer
ti
fi
cat
efr
om bank
det
ail
i
ngandst
atingt
hattheyar
efreefr
om anychar
ges.

 I
ftheinvest
ment
sar
ehel
dbyt
rust
eeonbehal
foft
hecompanyt
heaudi
torshal
lcal
lforandexami
ne
t
hetrustdeed

 I
fthesecur
it
iesar
eheldbythecl
i
ent
’sbrokerstheaudi
torshoul
dcal
lforsecur
it
iesf
orper
sonal
i
nspect
ion,
securi
ti
esshoul
dnotbel
efti
nt hehandsofbrokers.

 I
fthesecur
it
iesar
edeposit
edwit
habankoranyot
hercr
edi
tor
sassecur i
ti
estowar
dsl
oans
bor
rowedtheaudi
torshoul
dgetacer
ti
fi
cat
efr
om t
hebankorcredi
tort
othiseff
ect
.

 Ifthesecur
it
ieshavebeenpur
chaseddur
ingt
heyearheshoul
dv er
if
ythecert
if
icat
e.I
fther
eisno
certi
fi
cateheshouldexami
nefees,
stampdut
yet
c.incur
redonthepurchaseofinv
est
mentare
propert
ycapital
i
zed.

 I
fthesecur
it
ieshav
ebeensol
ddur
ingt
hey
earhemustcheckt
hesol
dnot
eandi
tshoul
dbe
appr
ovedbyBOD.

 Heshoul
densur
ethesecur
it
iesr
egi
ster
edi
nthenameoft
hecl
i
ent
.

 Af
tert
hev
eri
fi
cat
ionandi
nvest
mentt
hei
nvest
ment
sshoul
dbev
alued.

Ver
if
icat
ionandv
aluat
ionofCur
rentAsset
s

I
nvent
ory/St
ock

I
ncaseofmanuf
act
uri
ngconcer
nst
ocki
ntr
adei
ncl
udes:
St
ockofRawmat
eri
als St
ockofSemi -
fi
nishedgoods/ St
ockoff
ini
shedgoods
worki
nprogress
Scr
aporbypr
oduct St
oresofspareparts

I
ncaseoft
radi
ngst
ockmeansonl
yfi
nishi
nggoods.

Obj
ect
ivesofv
eri
fi
cat
ionandv
aluat
ionofst
ocki
ntr
ade

 Theamountshownagai
nstst
ocki
ntr
adei
sreal
l
yrepr
esent
edbyphy
sical
stockofgoods.

 I
fthecl
i
entownst
hest
ockcheckt
hef
inanci
alst
atement
.

 Checkst
ocki
ntr
adef
air
lypr
icedaccor
dingt
othegener
alaccount
ingpr
inci
ples.

Poi
ntst
obebor
nei
nmi
ndbyanaudi
torwhi
lev
eri
fyi
ngt
hest
ocki
ntr
ade

 Theaudi
torshouldexami
nethesystem ofi
nter
nalcheckr
egar
dingst
ockt
aki
ngandf
indoutwhet
her
i
tissuf
fi
cientenoughtopr
eventanymanipulat
ion.

 Heshoul
dobtai
ncopi
esofphysi
cal
lay
outsofall
plantswi
thnamesanddescr
ipt
ionsofal
l
depar
tment
sandther
einchar
geandsati
sfyhi
mself.

 Heshouldobt
ainallt
hedet
ail
sregar
dingt
hest
ocki
neachandev
erydepar
tmentandcompar
edwi
th
cur
renty
earsdata.

 Seether
ear
enoer
ror
sandf
raudsagai
nstt
aki
ngst
ock;
getacopyf
rom t
hest
affengagedi
nst
ock
taki
ng.

 Heshoul
dsati
sfyhimsel
fthatpr
operandadequat
erecor
dsofst
ockhav
ebeenmai
ntai
nedbycl
i
ent
.
St
ockkeptst
ockdispat
chedanddeli
vered.

 Heshouldascer
tai
nthemethodpr
escr
ibedi
nthemanagementi
nst
ruct
ionr
egar
dingcount
ing,
wei
ghingandmeasuringst
ock.

 Goodswhi
char
enoti
ncl
udedf
orcl
i
entbusi
nesst
hati
sexcl
udedf
rom st
ock.

 I
temscapi
tal
nat
urel
i
kef
urni
tur
eandf
it
ti
ngar
eexcl
udedf
rom st
ock.

 Dot
het
estcheckofphy
sical
exi
stenceofst
ockt
oascer
tai
ntheaccur
acyoft
hest
ocki
nhand.

 Heshoul
dinspectv
eri
fi
cat
ionsheetascer
tai
nwhet
hertheycov
erallt
heit
emsofst
ockandsel
ect
ed
i
temsofstockandseesui
tabl
eadjust
mentmadeinthebooksofaccount
sar
enot.

 Heshoul
dseethatst
ockl
yi
ngwi
th3rdpar
tysuchasf
abr
icat
orsorconsi
gneesar
eincl
udedi
nthe
st
ocksheet
s.

 Compar
ethebot
htheor
igi
nal
andf
aircopi
esofst
ocksheet
s.

 Audioshoul
dattendthest
ockt
aki
ngatl
eastf
orapar
toft
het
imeandseewhet
hert
heydi
schar
ge
thei
rduti
eseff
ici
entl
y.
  Heshoul
dver
if
ythegr
osspr
ofi
tandsal
esofcur
renty
earcompar
edwi
th2or3y
ear
sandanychange
ver
if
y.

 Heshoul
dfami
l
iarwi
thpr
ocedur
esandmai
ntenanceofst
ockr
ecor
ds.Fi
ndoutt
hedi
scr
epancy
.

 Checkt
hecal
cul
ati
on,
addi
ti
onandcast
ingi
nthest
ocksheet
sthei
rcor
rect
ions.

 Heshoul
dseet
hatwor
kofpr
epar
ingst
ocksheet
sissuper
visedbyar
esponsi
bleof
fi
cial

 Heshouldseet
hatanyalt
ernati
onhappensi
nthecostsheeti
tshoul
dbei
nit
ial
i
zedagai
nsuch
al
ter
ati
ons.I
fanydi
ffer
entitshoul
dbeenqui
red.

 I
fanygoodshav
ebeensol
dbutnotdel
i
ver
edshoul
dnoti
ncl
udedi
nst
ocki
nhand.

 Heshoul
dver
if
ywhet
heral
lgoodst
akeni
nthest
ocksheetar
epassedt
hrought
hepur
chasesbook.

Val
uat
ionofst
ocki
ntr
ade

Audi
tor
’sdut
yregar
dingv
aluat
ionofst
ocki
ntr
ade

 Heshoul
denquir
eint
othebasi
sofv
aluat
ionandseet
hatt
hest
ockhav
ebeencor
rect
lyv
aluedont
he
basi
sofval
uat
ionadopt
ed.

 Heshouldseethatbasi
sofv
aluat
ionadopt
edy
eart
oyearandf
aci
l
itat
ecompar
isonofpr
ofi
tof
di
ff
erentyear
s.

 Ast
ocki
smeantf
orr
esal
ethest
ocki
sval
uedatcostpr
iceormar
ketpr
ice,
whi
chev
eri
slower
.

 Heshoul
dtestcheckt
heext
ensi
onsi
.eheshoul
dseet
hatt
heext
ensi
onar
ecor
rect
.

 Heshouldcheckcer
tai
nval
uesoff
ewi
temsi
nthest
ocksheet
swi
thcor
respondi
ngi
nvoi
cepr
iceand
cur
rentsel
l
ingpri
ce.

 Heshoul
dveri
fysl
owmov i
ng,
absol
uteanddamagedgoodshav
ebeenl
i
stedsepar
atel
yandpr
oper
ly
val
uedandseesui
tabl
eadj
ust
mentmade.

 Compar
ethecur
renty
eargr
osspr
ofi
tofsal
etopr
evi
ousy
ear
sinv
est
igat
eint
omat
eri
aldi
ff
erences.

 Heshoul
dfi
ndoutwhet
hert
hecal
cul
ati
onsaddi
ti
onsandcast
ingi
nthest
ocksheet
sar
ecor
rect
.

 St
ocksheet
smustbesi
gnedbyr
esponsi
bleof
fi
cer
s

Val
uat
ionsofdi
ff
erenti
temsofst
ocki
ntr
adear
e:

 St
ockofr
awmat
eri
als  Stockofsemi-f
ini
shed
goods
 St
ockoff
ini
shedgoods  Stockofconsumable
goods
 St
ockofspar
es

 Val
uat
ionofRawmat
eri
als:-Rawmat
eri
alsar
erequi
redf
ormanuf
act
ureofgoodsandnotf
orr
e-
 sale.Theref
ore,
stocksorrawmat er
ial
sshouldbeval
uedatcostpri
ceandnotonmarketpr
ice.I
f
mat eri
alsar
epurchasedatdif
fer
enttimestheaver
agepricecanbeconsi
der
ed.I
fther
eisanyfal
lin
thev al
ueofrawmat eri
ali
tshoul
dbeadequat el
yprov
idedfor.

 Valuati
onofSemi -
fini
shedgoodsorwor kinprogress:-Semi manufact
uredgoodsont hedateof
balancesheetshouldbev al
uedatcost,
andnotatt hemar ketpri
ce.Here,costmeansworkscosti.
e.
costofrawmat eri
alsplusdir
ectwagesplusdi
rectexpensespl usareasonableport
ionoffact
oryor
producti
onoverhead.(Off
iceandsell
i
nganddistri
butionov er
headsshouldnotbeincludedinthe
cost).

 Val
uati
onofFini
shedGoods:-I
ffi
nishedgoodsar
epurchasedforr
e-sal
e,theyareval
uedatcost
.
Costmeansthepur
chasepri
ce+ar easonabl
epr
opor
ti
onofdi r
ectexpenses,suchasfr
eight
,dut
y,
et
cincur
red.

Iff
ini
shedgoodshavebeenmanuf actur
edtheyshoul
dbev al
uedatcostofmanuf
act
ureormarketpri
ce,
whicheveri
slower.Costofmanufactur
ecomprisescostofr
awmat er
ial
susedpl
usall
manufactur
ing
expensesincur
reddi
rect
lyont
heirproduct
ion.

I
ffi
nishedgoodshavebeensol
dunderforwar
dcont
ract
s,butnotdel
i
ver
edatt
hedat
eoft
hebal
ancesheet
,
t
heyshouldbevaluedatt
hecontr
actr
ates.

 Valuati
onofconsumablest or
es:
-Consumablestor
esrefer
stomat er
ial
s,suchasl
ubricants,
oils,
grease,t
all
ow,dyes,
fuelsetcwhichar
econsumedduringtheprocessofmanufact
ure.Itshouldbe
valuedatcostofmanufacturi
ngandcurr
entmarketpr
icewhicheveri
slower.

 Val
uati
onofSt
ockofsparepar
ts:
-itr
efer
stot
hatar
erequi
redf
ort
her
epai
rsofpl
antandmachi
ner
y
andequi
pment
.Itshoul
dbeval
uedatcost

Ver
if
icat
ionofdi
ff
erentLi
abi
li
ti
es

 Ver
if
icat
ionofSundr
yCr
edi
tor
s

Whi
l
ever
if
yingt
hesundr
ycr
edi
tor
sanaudi
torshoul
dbeari
nmi
ndt
hef
oll
owi
ngpoi
nts.

 Heshouldmanagementandv
eri
fi
eswhet
hert
heschedul
econt
ainsal
lthedet
ail
saboutsundr
y
cr
edi
tors.

 Heshoul
dcheckt
heschedul
eofcr
edi
tor
swi
tht
hebal
ancei
nthecr
edi
tor
sledger
s

 Checkt
heaccur
acyoft
hecr
edi
tor
sledgerbal
ance.

 Heshoul
dcheckt
hepur
chasebookandpur
chaser
etur
nswi
tht
hehel
pofi
nvoi
cesandcr
edi
tnot
es.

 Heshoul
dcheckt
hepost
ingf
rom t
hesubsi
diar
ybooks

 Heshoul
dcheckthegoodsi
nwardbooktoensur
ethatal
lthegoodspur
chaseddur
ingt
hey
earhav
e
beenact
ual
l
yreceiv
edandthedul
yrecor
dinthepur
chasesbook.

 Heshoul
dexaminet
hepur
chasei
nvoi
cef
ort
hesucceedi
ngy
eart
oensur
ethatnoneoft
hem r
elat
ed
t
othecurr
enty
ear.

 Heshoul
dcompar
etheper
cent
ageofgr
osspr
ofi
toft
hecur
renty
earwi
tht
hel
asty
ear
.Ifany
 v
ari
ati
onshoul
dbechecked.

 Heshoul
dpayspecial
attent
iont
otheentr
iesmadeei
theratt
hebegi
nni
ngoft
hey
earorendoft
he
yeart
over
if
ywhethertherei
sanyfi
cti
ti
ousent
ri
esaremade.

 I
fanycredi
tbal
ancei
sunpai
dforal
ongper
iodshoul
denqui
reandcheckwhet
hert
heamounti
s
misappr
opr
iat
ed.

 I
fthebusi
nessmai
ntai
ndiscountoncredi
tor
sledgert
heaudi
torshoul
dseet
hatt
heyar
eshownon
t
heassetssi
deoft
hebalanceSheet.

Ver
if
icat
ionofbi
l
lspay
abl
e

 Heshoul
dobt
ainaschedul
eofbi
l
lpay
abl
eandv
eri
fywhet
herschedul
econt
ainsal
lthedet
ail
soft
he
B/
P.

 Checkt
het
otal
oft
heschedul
eofB/
Pwi
thB/
Paccount
sbook.

 Ver
if
ythepay
mentmadef
ort
hebi
l
lspay
abl
ewi
tht
heent
ri
esi
nthecashbook.

 Exami
net
her
etur
nedB/
P,whi
chcanbet
akenasanev
idencef
ort
hepay
mentmadef
ort
hemat
ured
bi
ll
s.

 Ver
if
ythebi
l
lspay
abl
eret
ir
edunderr
ebat
e.

 Ver
if
ythebal
ancei
nB/
Paccountwi
thunpai
dbi
l
lsshowni
nbi
l
lspay
abl
eaccount
.

 Checkt
hegenui
nenessofdr
awer
sandent
ri
es.

 Heshoul
dseet
hatB/
Pwhi
chhaspai
disnotshownasout
standi
ng.

 Heshoul
dcheckB/
Ppai
daf
tert
heB/
Sdat
ebutbef
oret
hedat
eofaudi
twi
thent
ri
esmadei
ncash
book.

 I
fanychar
geshasbeencr
eat
edt
hatshoul
dbeshowni
nBal
ancesheet
.

Ver
if
icat
ionofCont
ingentLi
abi
li
ty

ACont i
ngentLi
abi
l
ityi
sonewhi
chisnotanact
uall
iabi
l
ity
,butwhi
chmaybecomeanact
ual
li
abi
l
ity
ont
hehappeni
ngornonhappeni
ngofacer
tai
neventi
nthefut
ure.

 Heshoul
dobt
ainali
stofcont
ingentli
abi
li
ti
esfrom t
hemanagementandal
soobt
aincer
ti
fi
cat
efr
om
t
hemanagementt
hatallt
hecontingentl
i
abil
it
iesar
ediscl
osed.

 Veri
fytheexist
enceofcontingentl
iabil
i
tiesinthebusinesscar
eful
l
y .Tov
erif
ytheexi
stencehe
shouldexaminetheaccountbooks, meetingminutes,cont
ract
senteredi
ntobusi
ness.Share
cert
if
icat
e,cert
if
icat
efrom banks,bil
lsdiscountedetc.

 Cont
ingentl
i
abi
l
iti
esdi
vi
dedi
nto2gr
oups

a.Conti
ngentLi
abil
i
tiesi
nrespectofwhi
chnopr
ovi
sionshav
ebeenmadeasperpar
tIofschedul
e
VIofcompaniesactof1956.
 b.Cont
ingentl
i
abi
l
iti
esi
nrespectofwhi
chpr
ovi
sionhav
ebeenmade

 Wherether
ear
epr
ovi
sionsf
orcont
ingentl
i
abi
l
iti
est
heaudi
torshoul
dexami
net
heboar
dmi
nut
es
book.

 Seet
hatcont
ingentl
i
abi
l
iti
esar
epr
oper
lydi
scl
osedi
nthebal
ancesheetandi
tshoul
dshowi
nli
abi
l
ity
si
de.