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What is The Physical Verification of Inventories/Fixed Assets?

Physical verification is the process by which an auditor confirms the existence of inventories and fixed assets that are recorded by the client in their financial statements.

Documents required for applying:

  • Company balance sheet or fixed asset register/inventory register.

What is the process of registration?

  • Verification of the records (accounting books) with reference to the documentary evidence.
  • Confirmation of the opening balance from the schedule of fixed assets, ledger, or fixed asset register.
  • Verification of assets acquired during the year based on purchase invoices or title deeds.
  • For fixed assets fully depreciated during the year of acquisition, the auditor must examine whether they were recorded in the fixed assets register. If they were registered, then the auditor needs to examine the adjustments to the account of the asset and the gain or loss on the sale.
  • Verification of ownership of land and buildings based on their title deeds.

Frequently Asked Questions

  • Physical verification needs to be done to ensure that assets shown in the financial statements exist and any accounting discrepancy regarding its valuation is eliminated.