How the auditor verifies the Patents? What is Trade Mark and Copyright?

The auditor first of all examines the patents and verifies them with the help of certificates under which patent rights have been granted. The auditor should ensure that the patents are registered in the name of the client. Patent rights, are acquired in two ways:

By Purchase: If they are purchased, the fees paid for purchasing or taking out such rights should be treated as capital expenditure and as such debited to patents account while renewal fees, being of revenue nature should be debited to Profit and Loss Account.

By Development and Research: If the patents are created by the client by doing some research, it should be seen that the money so spent on research is of capital nature and, hence, should be debited to patents account.

If the number of patents is large he can call for a schedule thereof from the client and should examine the registered numbers, date of acquisition, description and unexpired period from this schedule. The renewal fees should be vouched with aid of receipts available with the client. It should be noted that if a patent is not renewed, it will lapse. A patent right lasts for 16 years unless the term itself is used and maintained as a right by the business which acquires or develops it.

Trade Mark and Copyright.

Trade Mark is registered in the name of the client and is a symbol of a particular business. It is intangible asset and it distinct the commodities of one business with another. Copyright is the exclusive right to produce or reproduce a book or an article. Copy right give authors the exclusive right to publish, reproduce, broadcast or in other ways to deal with the literary, dramatic, musical or artistic work. Verification and valuation of such rights are done by examining that:

  • Rights in respect of trade mark and copyrights remain valid as on the date of the balance sheet.
  • The items should be written off if they do not command any value now.
  • The relevant documents that confirm the ownership and continuity are present.
  • Payments made in respect to trade marks and copyrights have supporting vouchers.
  • Renewal fees are paid at the right time.
  • The auditor should see whether the business is valued every year through the revaluation method. The profit or loss thus calculated should be duly posted in Profit and Loss Account.
  • He should confirm that the trade mark of the client should not be used by others.

Tags: B.Com

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