What Does “Verification” mean in Auditing?


Verification adds an extra layer to vouching. Verification refers to the inspection of assets appearing in the balance sheet part of financial statements and ensuring that assets are recorded per legislation.

The auditor will have made a decision on the general approach to be taken to the audit work.

If internal controls are effective and working properly, the amount of verification work will be reduced. The verification procedures would be more substantive if internal controls were not functioning properly.

To make verification, the auditor needs to gather evidence that will lead to a conclusion if classes of transactions, balances, and disclosures in the financial statements are properly stated or not.


Let’s take a look at the steps for verification of Freehold Land and Building:

  • The auditor should examine the title deed of the land and building.
  • The land and building shown in the books should be according to the title deed. The owners’ names as per title shall be checked if the promoters hold the property.
  • Profit or loss on the sale of it should be duly adjusted in the account.
  • If any addition is made during the year, the auditor shall diligently take care of the same.

Auditor’s duty regarding verification

The auditor is required to provide an opinion on financial statements, whether they reflect a true and fair view of the financial position or not.

He has to fairly ascertain and examine the correctness of assets and liabilities appearing on the balance sheet. So, the auditor has to keep in mind certain aspects while verifying the assets as :

  • Ensuring the existence of assets
  • Legal ownership and possession of assets.
  • Ensuring proper valuation of assets
  • Ensuring the assets are free from any charge.

Vouching and verification

Vouching is confirmation of the correctness and authenticity of book entries, while verification confirms the existence, ownership, and existence of assets on the balance sheet.

The auditor’s duty is to vouch for entries and prove the existence of assets and liabilities appearing in the financial statements.

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Objectives of verification

  • The purpose of verification is to ascertain the financial health of financial statements. When the verification is done, the auditor should be able to opine on a true and fair view of the state of business affairs.
  • One of the purposes of verification is to certify ownership. The auditor has to look at the vouchers, documents, deeds, agreements, and other papers that can be used to verify the ownership of the title. He needs to satisfy himself that the assets are really owned by the business.
  • The auditor needs to ascertain the existence of assets. It has to be done as per the books of accounting. Verification also means checking the actual position of assets with physical existence.
  • The purpose of verification is to check that the asset is free of any charge. The auditor has to check whether the assets have been pledged or mortgaged for borrowing money. In that case, the lenders must have created charges over the assets. This must be shown in the notes to the accounts.