Physical verification of asset

Asset verification Procedure

1. PHYSICAL VERIFICATION OF ASSETS

2. What are difference between Verification and Vouching: Verification : It Is verified on Balance sheet Items example - Stock Vouching : It Is vouching on Profit and loss Items example – Travelling Expenses

3. TYPES OF ASSETS

4. PHYSICAL VERIFICATION OF PROCESS Intimation by auditor to client via mail regarding Physical verification program showing its date, team members, procedure etc. GM forwards the mail to stores Physical Verification conducted on the decided date by the respective team

5. PHYSICAL VERIFICATION OF PROCESS Based on the physical, a taking report must be prepaid signed by the members and unit head Such Report must be compared with the Cash/Stock/Fixed Asset Register and difference noted along with reasons Based on differences a Reconciliation Statement must be prepared

6. PHYSICAL VERIFICATION OF PROCESS Such Statement must be presented before higher autority like CFO & ED After their approval necessary actions to be taken & adjustments to be made in book

7. PHYSICAL VERICATION OF CASH

8. PHYSICAL VERIFICATION OF CASH CASH: It is a current asset. TYPES: Main Cash Petty Cash Imprest Cash Suspense Cash Balance of stamps in hand

9. PHYSICAL VERIFICATION OF CASH PHYSICAL CASH VERIFICATION BEFORE ACTIVITIES: Cash physical verification should be on surprise basis . Freeze the cashier movements from the beginning to end of physical cash verification. Monitor his activities, phone calls, in & outs to/from his pockets, preparing/destroying vouchers Check for the number of cash books, i.e., petty cash, Main cash, Factory cash, etc., and in-charge who maintains the same, possibly from the TB

10. PHYSICAL VERIFICATION OF CASH PHYSICAL CASH VERIFICATION BEFORE ACTIVITIES: Cash book printout necessarily from ERP/software, document with reasons if not printed from ERP/software. Cash book balance should be obtained ‘as on the date of the audit’ even if the books were not updated. Cash book printouts should contain the closing balance stating dr /cr. i.e , negative balance; on negative balance, comment on ERP’s control. Observe the safeness of the cash, i.e., secured place, locker facility, durable locker, with back up keys available with senior mgnt ,

11. PHYSICAL VERIFICATION OF CASH PHYSICAL CASH FORMAT: CASH VERIFICATION PROCESS: Check that the physical cash balance tallies with the balance shown by the cash book. Check that the cash in safe/cash in transit is within the insurance cover taken. Unaccounted Vouchers should contain adequate supporting evidence, with approval .

12. PHYSICAL VERIFICATION OF CASH CASH VERIFICATION PROCESS: IOU’s should not exceed 48 hours in time, from the time of payment, on default; concerned staff’s account needs to be debited Suspense cash receipts should be enquired. Check that signatures of the payee are taken by the cashier on the cash payment Voucher at the time of making cash payment.

13. PHYSICAL VERIFICATION OF CASH CASH VERIFICATION PROCESS: Enquire for unpaid wages/salaries available in hand not paid and not accounted as unpaid wages/salary Avoid phone calls, tea breaks, lunch breaks, or plan accordingly Try to do physical verification of cash at the time where cashier/in-charge would not move out of the work place. Do not discuss deviations/issues with public or at public place and with friends/relatives.  

14. PHYSICAL VERIFICATION OF CASH CASH VERIFICATION PROCESS: Do obtain signature from the client with date as well as time, do sign the cash verification report with date and time. Do not attempt to provide photocopy of working paper, inform to take required details from the working papers if required by the client. Get the replies from the cashier for the deviations/issues in the report.

15. PHYSICAL VERIFICATION OF INVENTORY

16. PHYSICAL VERIFICATION OF INVENTORY INVENTORY: It is a current asset Which are held for sale in ordinary course of business In the process of production for such sale; or In the form of material or supplies to be consumed in the production of goods or services for sale (as per AS 2)

17. PHYSICAL VERIFICATION OF INVENTORY

18. PHYSICAL VERIFICATION OF INVENTORY METHOD OF INVENTORY TAKING: Periodic Inventories - Single Points of Time Continuous Inventories - Different Points of Time

19. PHYSICAL VERIFICATION OF INVENTORY PHYSICAL VERIFICATION OF INVENTORY PROCEDURE: Prior to and/or on the date when we will observe physical inventories On the date of our physical inventory observation, tour the entity's facilities On the date of our physical observation, perform test counts of inventories On the date of our observation, obtain copies or note the details of the following documents, and determine whether the items included in them were excluded from or included in the physical count

20. PHYSICAL VERIFICATION OF INVENTORY ABC ANALYSIS: It is a form of inventory control or material cost control; It is classify them in 3 categories: CONTROL Category A Category B Category C Highly Moderately Least % of Value 70% 20% 10% % of Quantity 10% 20% 70% Control Constant Need Based Little

21. PHYSICAL VERIFICATION OF INVENTORY BIN CARD SYSTEM: It is the responsibility of the store keeper to maintain bin card. Bin card is maintained inside the warehouse or  stores BIN CARD

22. PHYSICAL VERIFICATION OF INVENTORY RECONCILIATION O F DISCREPANCIES: 1. Book Quantity Found with Physical Quantity Found 2. Book Quantity Found but Physical Quantity not Found 3. Book Quantity not Found but Physical Quantity Found

23. PHYSICAL VERIFICATION OF INVENTORY In case of Quantity Excess/Surplus reasons: Where materials are not issued from the stores, but the entry of issues of posted. Where the amounts of materials issued is less than the quantity for which entry issue is made Where no issues are made but only issue entry is made in the stock record.

24. PHYSICAL VERIFICATION OF INVENTORY In case of Quantity Short/Deficit reasons: Excess physical issue than the actual issues entries posted Issue made but corresponding entries not made in issue column Issue of materials without requisition Misappropriation Defective instruments

25. PHYSICAL VERIFICATION OF FIXED ASSET

26. PHYSICAL VERICATION OF FIXED ASSET Tangible  assets are physical things that you can touch - in the case of a business this might be machinery, buildings, land.

27. PHYSICAL VERICATION OF FIXED ASSET TYPES OF FIXED ASSET Tangible Asset Intangible Asset Land & Building Patents Plant & Machinery Copyrights Furniture & Fixtures Trademark Office Equipment Vehicles

28. PHYSICAL VERICATION OF FIXED ASSET STEP OF PHYSICAL VERIFICATION OF FIXED ASSET: Understand the client procedure Obtain Fixed Asset Register as maintained by the client Vouching of Additions to Fixed Asset Decision of Sample Checking Bills Assets on Lease Imported Assets Other Aspects for checking

29. PHYSICAL VERICATION OF FIXED ASSET STEP OF PHYSICAL VERIFICATION OF FIXED ASSET: Vouching of Deletion from Fixed Asset CARO-Whether Disposal affect the Going Concern Decision of sample Checking of Sales bills of Disposal Depreciation and Amortization Revaluation

30. PHYSICAL VERICATION OF FIXED ASSET The following are the documents which can be examined by the auditor in this regard: Check on Asset Code mention or not Location Classification & Item Description Model/Serial Number/Make Major technical specs if details of available Year of manufacturing with available

31. PHYSICAL VERICATION OF FIXED ASSET Usable/Not Usable Present running condition Addition made or not if yes details Transfer from details Send to document details Any other details

32. PHYSICAL VERICATION OF FIXED ASSET Vehicle List details: Check on Vehicle Number Check on Engine Number Check on Chase Number Check on Insurance of Vehicle Check on Registration Certificate and Driving Licenses

33. PHYSICAL VERICATION OF FIXED ASSET RECONCILIATION OF DISCREPANCIES: 1. Book Quantity Found with Physical Quantity Found 2. Book Quantity Found but Physical Quantity not Found 3. Book Quantity not Found but Physical Quantity Found

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