Point out the difference between Verification and Valuation?
Difference between Verification and Valuation.
Valuation implies critical examination and testing of determined values of assets on the basis of its utility during a particular period. The valuation of assets is made on the basis of generally accepted accounting principles. It helps in assessing the correct financial position of the enterprise.
Verification means proving the truth or confirmation. It is an inquiry into the value, ownership and title, existence and possession, the presence of any charge on the assets of the organization.
- Meaning: It means ascertaining the accuracy of the assets and liabilities appearing in the Balance Sheet by documentary evidence and physical examination.
- Objects: It is done with the object of proving the existence, ownership, possession, freedom from charge and proper valuation.
- Scope: It is wider in scope. It also includes valuation.
- Responsibility: Verification is done by the auditor or his staff.
- Nature: Verification is objective. It is based on the documentary evidence and physical examination.
- Liability: The-auditor himself does the work of verification. It does not rely on the certificates provided by others.
- Meaning: It means testing the accuracy of the valuation of the assets and the liabilities according to the accepted accounting principles.
- Objects: It is done to ensure that the Balance Sheet shows a true and fair view of the financial position of the organization.
- Scope: Its scope is limited.
- Responsibility: Valuation is done by the clients staff but it is tested by the auditor or his staff.
- Nature: Valuation is subjective. It is based on documentary evidence and certificates given by the valuers.
- Liability: The auditor is not liable for in correct valuation as he is not the valuer. He can depend or rely on the certificates given by the valuers or official of the client.