AUDITING

Roll No.
19 21 22 34
S.Y B. A&F

Names
Kamble Priyanka Kumawat Suman Kuttikadan Regency Nair Radha
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AUDITING

 DEFINITION AND MEANING OF VERIFICATION OF ASSETS

According to Spices and Pegler, Verification of assets means an inquiry into the value, ownership and title, existence and possession, the presence of any charge on the assets. Joseph Lancaster has defined verification of assets as, A process by which the auditor substantiates the accuracy of the right hand side of the balance sheet and must be considered as having three distinct objectsa) The verification of the existence of the assets, b) The valuation of the assets, and c) The authority of their acquisition. On the basis of above definitions, verification of assets can be stated as a process of substantiation of assets recorded in the books of account, by means of physical inspection and examination of legal and official documents, and then forming expert opinion as to existence, ownership, possession, classification and valuation of assets of an entity.

 OBJECTIVE OF VERIFICATION
According to the statement of Auditing Practices issued by the Institute of Chartered Accountants of India, the auditors objective with regards to verification of assets generally is to satisfy himself that: 1. 2. 3. 4. 5. 6. They actually exist at the Balance Sheet date; They are accurately valued; They are free from charges; They are in possession of the client or any person authorized by him; They actually belong to the client; They are properly recorded and presented in the books of account.

S.Y B. A&F

AUDITING

 DEFINITION OF INTANGIBLE ASSETS

Accounting Standard (AS) 26, Intangible Assets defines intangible assets as belowAn intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others or for administrative purposes

 MEANING OF INTANGIBLE ASSETS

An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in todays marketplace.

 AUDIT PROCEDURES FOR INTANGIBLE ASSETS ARE AS FOLLOWS;

I. Goodwill

 EXISTENCE, OWNERSHIP AND POSSESSION:1. Ensure that no goodwill is recorded, if no consideration has been paid. As per Accounting Standard (AS) 10, goodwill should be recorded in the books only when some consideration in money or moneys has been paid for it. Internally generated goodwill is not recognised in the books of account. 2. According to AS-26, goodwill is equal to purchase consideration less fair value of net assets acquired. 3. It may be noted that being an intangible asset, goodwill cannot be subjected to any lien or charge.

 VALUATION AND DISCLOSURE:1. As per requirements of Accounting Standard (AS) 26, goodwill should be written off over a ten year period. 2. In case firm is not earning above normal profits, the auditor should discuss with the client the need to write it off.

II.

Trademarks:

A trademark is a distinctive sign, symbol, design or brand name established to enable the purchaser to identify the product easily.
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AUDITING

 EXISTENCE, OWNERSHIP, AND POSSESSION:1. Examine a schedule of trademarks, signed by a responsible officer of the client, very carefully. 2. Examine certificate of registration issued by the office of the Registrar of trademarks. 3. Examine the last renewal fees receipt to ascertain the validity and legal enforceability of trademarks. 4. In case trademark has been purchased, the agreement with the seller should be examined.

 EXAMINE VALUATION AND DISCLOSURE:1. Trademarks are shown in the balance sheet at their cost less amortisation chargers till date. 2. The auditor should ensure that if trademarks were purchased, the cost includes purchase price and registration charges. 3. In case trademarks have been developed by the client, the cost should include cost of developing outlays, design costs, and other associated direct costs.

III.

Patents:-

A patent is an exclusive right granted by the Government to manufacture and dispose of or otherwise benefit from the results of the invention of a product or process. The audit procedures to verify patents are given below-

 EXISTENCE, OWNERSHIP, AND POSSESSION:1. The auditor can verify the existence, ownership and possession of a patent by examining certificates or patent letters issued upon the registration of the patent. 2. In case patent rights have been purchased, the assignment deed surrendering sellers right should be examined. 3. Obtain a schedule of patents duly signed by a responsible officer of the client and trace each patent on the schedule to the respective ledger account i.e., Relevant Patent Account. 4. Being an intangible asset, patents cannot be objected to any lien or charge.

 VALUATION AND DISCLOSURE:1. Ensure that patents are being shown at cost less amortisation chargers i.e. at its unamortised value. 2. Cost of patent includes its purchase price and registration cost, if bought outright.
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