verification of assets and liabilities presentation.pdf

CONCEPT OF VERIFICATION OF ASSETS AND LIABILITIES

1. VERIFICATION OF ASSETS
AND LIABILITIES IN

2. Introduction to
Verification of
Assets and
Liabilities

3. Importance of Verification in Auditing

Risk Assessment

Identifying potential risks through thorough asset verification processes.

Fraud Prevention

Mitigating risks of fraud by/Verifying transactions and asset ownership.

'Accuracy Assurance

Ensuring the accuracy of financial statements through credible asset valuation.

Regulatory Compliance

Meeting regulatory requirements by validating reported assets and liabilities.

Financial Integrity

Maintaining financial integrity by consistent auditing and verification procedures.

Stakeholder Confidence

Building stakeholder confidence through transparent asset and liability management. E

4. Regulatory Framework and Standards
©

‘Compliance with auditing
standards ensures transparency in
financial reporting.

Legal Framework (02)

Understanding legal requirements.
aids auditors in asset verification

9 Best Practices

Adopting best practices enhances:
the effectiveness of auditing
procedures.

(02) Compliance Importance

‘Strict compliance underscores the
accountability of auditors in the
profession.

processes.
Reporting Guidelines © © Audit Integrity
Adhering to reporting standards Integrity in auditing fosters
reinforces credibility and reliability stakeholder confidence in reported
in audits. assets.

Ethical Considerations ©

Maintaining ethical practices is vital
for trust and integrity in auditing. < Key Pointe

四 Standard Updates

Regular updates to standards keep
Overview > audits relevant and effective.

5. Types of Assets and Liabilities

Assets expected to be
ore [vetado Cash meto |Farvaue at acnstin| colton | eeeace | Blanc Shee
Non-curentassets | Aseeisheldformore | propery, Equipment | rires aus cé ess cresson | Recorded atcost | Balance Sheet
GurentLibiies | Obigaions due win | Accounts Ajab} Recognized when Cost Rein) era
Non-CurentLibiies | Obisaions ue sRer [Step Ban Bond amazed over tem | Present vale offre | recorded ace value | Balance Sheet

OIT Quick Asset Value Long-Term Impact Liabilities Monitoring
Current assets can fluctuate by 20% Non-current assets contribute Current abilities can increase cash flow

yearly. significantly to revenue. risks.

6. Initial Planning for Verification Processes

Identify
Objectives

Determine the
specific objectives
of asset and
liability
verification.

Gather
Information

Collect relevant
data regarding
assets and
liabilties for
evaluation.

Assess Risks

Evaluate Potential

risks associated
with the
verification
process.

01

02

03

Plan
Procedures

Develop
procedures and
methods for
verifying identified
assets and
liabilities.

04

7. Risk Assessment in Verification

Assessment
a 01
Identify potential risks impacting asset and
liability verification processes
Analysis
02
Evaluate risk factors to determine their significance
and likelihood.
Planning
Develop audit strategies tailored to address identified risks
effectively.
Execution
Conduct detailed verification procedures and tests based on risk
| assessments

8. Gathering and Analyzing Evidence

の

O

Obtain

O

Obtain confirmations from
third parties to verify asset

existence.

Evaluate

O

Evaluate the appropriateness
of accounting policies used

for assets.

Review

Review supporting
documents for liabilities to
ensure accuracy.

Document

Document all evidence
collected for audit trails and
accountability.

©

©

Inspect

Inspect physical assets to
confirm their presence and
valuation.

Cross-Check

Cross-check balances
against prior period
statements for anomalies.

©

O

Assess

Assess the reasonableness
of management's estimates
on liabilities.

Confirm

Confirm bank balances and
loans with financial
institutions directly.

9. Evaluating Internal Controls

sE

Strong internal controls enhance the reliability of financial reporting and asset
verification.
Effective controls help in minimizing fraud risks and ensuring compliance with
regulations.

Infernal controls can become overly complex, leading to inefficiencies in processes.

High implementation and maintenance costs may deter organizations from establis
robust controls.

‘Advancements in technology can improve intemal controls and audit efficiency
significantly.
Increasing regulations offer opportunities for firms to enhance their compliance
frameworks.

Rapid technological changes may create vulnerabilities that internal controls cannot
address.
External fraud risks are rising, threatening the effectiveness of existing control systems.

10. Verification Techniques for Assets

O 0 0 @

Existence Ownership Valuation Classification \
Confirming physical Verifying legal ownership. Assessing fair value Ensuring accurate /
presence of assets via documentation like through market categorization of assets in
through observation. tiles or contracts, ‘comparison or appraisals. financial statements.

Xx E Advantages

Financial Integrity Regulatory Compliance

Ensures accurate representation of financial standing. Adheres to financial reporting standards and regulations.

Identifies potential discrepancies and prevents fraud. Builds trust among investors and partners in financial

Risk Mitigation Stakeholder Confidence
assertions.

11. Subsequent
Payments

Confirmation

Legal Letters

Review post-period
payments to validate
recorded liabilities.

Obtain direct
Verification from
creditors regarding
outstanding
balances.

Request legal
opinions to identify
any/contingent

liabilities.

Analytical
Procedures

Compare ratios for
deviations indicating
unrecorded liabilities.

Review Contracts
Examine agreements

and terms affecting
liability recognition.

Verification Techniques for
_ Liabilities

12. Substantive Testing Procedures

Flow Chart

Identify Accounts

Proceed Focused

Adjust Plan

This is a sample flowchart for this slide. Please rearrange the flowchart to convey your message.

13. Sampling Methods for Verification

Stratified Sampling Focused on spetific segments | Requires detailed knowledge Diverse asset categories 80% accuracy
o © ©

significantly. testing, ‘sampling techniques.

14. Common Challenges in Verification

Improved Accuracy

Verification increases the overall accuracy of financial statements
significantly.

Risk Reduction,

Reinforces risk reduction in finanial reporting through direct asset
Validation.

Enflanced Credibility

Boosts credibility with stakeholders by providing verified financial
data.

Operational Efficiency

Streamlined processes often lead to better operational efficiency in
audits.

oooe

Time Consuming

Verification processes can be time consuming and delay the audit
timeline.

Resource Intensive

Requires substantial resources, including personnel and technology
for verification.

Complex Procedures

Often involves complex procedures that can pose challenges for
auditors.

Potential Errors

Inherent risk of errors during verification processes may undermine
results

15. Case Studies in Asset Verification

Problem Faced

Difficulty in establishing the true asset values

Approach

Solution Offered

Implementing a robust verification process

Benefits

Increased accuracy in financial reporting

Collect Data

Gather all necessary
documentation for assets

Verify Ownership

Confirm ownership through
legal documentation

Assess Value

Evaluate assets using
recognized valuation
methods

Document Findings

Compile all verification
findings into a report

16. Case Studies in Liability Verification =

Problem Faced Solution Offered Benefits

Incomplete records leading to Implement comprehensive Accurate financial statements
incorrect liability Valuation. reconciliation of liabilities. and enhanced compliance.

17. Technological Tools
for Verification

18. Role of Auditors in Verification

e e

John Mike
Audit Lead ‘Audit Manager
Lucy Tom Eva

Field Auditor Compliance Officer Assistant Auditor

19. Documentation Requirements in Verification

Obtain third-party confirmations for assets and liabilities
regularly.

Collect all relevant contracts, invoices, and agreements
for assets.

Maintain detailed listings of all á$sets and liabilities in
audits.

Conduct physical inspection of tangible assets to verify
existence,

20. Reporting Findings of Verification

Current Verification Progress

Discrepancies Being Resolved

85%

A | 190%

v

Discrepancies Found

12%

A

59% 100% | | w 66% 100%
Asset and Liability Verification Status Verification Performance Over Time
160
or
2
Verified El
= Not Verified 5 50
“Pond $
‘Diserepancies do
o
Quarter 4 Quarter 2 Quarter 3 Quarter 4
Quarters
Assets Verified Liabilities Verified

Pending Verifications

5% DÁ

This is a sample dashboard and is 100% editable. Please edit the metrics according to your message.

21. Handling Discrepancies and Issues

Identify

Number any discrepancies during the auditing process.

Follow-up Evaluate

Check for reoccurrence of discrepancies in future audits.

Evaluate the effectiveness of resolution methods ©
‘employed.

Document

Assess the impact of discrepancies on the audit.

Gather
に Collect supporting documentation for discrepancies
found,

Communicate

Record the outcomes of discrepancies and resolutions. Notify relevant stakeholders regarding discrepancies.

Resolve

4 Find solutions to discrepancies through discussion.

22. Follow-up Procedures for Verification

Confirmation Analytical

Initial Review Requests Procedures

Conduct a Documentati ‘Send requests to ‘Substantive ‘Analyze financial Final

preliminary on Check third parties to or) data for Evaluation

assessment of confirm account ‘consistency and

en en Verify the une | Perform tests to SS Review findings

labiiies. existence of hvalidate the and assess the
supporting accuracy of overall audit
documents and entries made. conclusions.
records.

ot 02 03 04 05 06

23. Future Trends in Auditing Verification

‘Automation Blockchain Consectetur Adipiscing

Incorporation of Al and machine Using blockchain technology for
learning for efficiency. —_ 2 secure asset Verification ‘Advantages

Enhanced security and accuracy in audits.

\ Advantages
| an
processes.
Advantages
Remote Auditin 要 A Increased transparency with blockchain
9 = " Data Analytics pese
Growth of virtual audits = Leveraging big data analytics
enhancing accessibility and for insightful auditing. Advantages

cost.

Cost savings by reducing the need for physical
presence.

24. Best Practices for
Effective Verification

O

O

O

Review

Ensure review of documentation
is thorough and complete,

Analyze

¡Conduct analytical procedures to
identify potential discrepancies.

Evaluate

Assess the reliability of internal
controls over records.

O)

O

©

Confirm
Request confirmations from third

parties regarding asset
existence.

Inspect

Physically inspect assets to
verify existence and condition.

Document

Maintain comprehensive
documentation of verification
processes.