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Monday, 26 September 2011

How would you verify the following items, 1 Goodwill 2. Motor vehicles 3. Preliminary expenses 4. Work in process

VERIFICATION OF GOODWILL :-
Goodwill is also an asset of the company. When any firm or company is purchased good will is also included in the purchase. To verify the value of goodwill auditor has to examine the purchase agreement. Auditor should find out from the purchase agreement that the amount of this asst is correct. Good will usually appear in the balance sheet at cost. There is no legal compulsion to write it. If company likes to write off then auditor should see that the amount written off is according the resolution of the board. Important point about goodwill is that it does not depreciate by use.


VERIFICATION OF MOTOR VEHICLES :-
While verifying the motor vehicles auditor will see the following items :

1. Auditor should check the cost of motor vehicles by the purchase documents.

2. He should examine the registration book of the motor vehicle.

3. He should verify the insurance policy of the vehicle.

4. He should make the physical checking of the vehicles.

5. He should compare the registration number with the motor vehicles.

6. He should also see that asset is fully depreciated.


VERIFICATION OF PRELIMINARY EXPENSES :-
Auditor should examine all the legal documents before verifying these expenses. He should also verify that all those items which are included in these expenses should have concern with the promotion of the company.

Following items must be checked by the auditor :

1. Auditor should check the preparation cost of legal documents.

2. Auditor should check those legal and professional charges which are spent on the formation and promotion of the company.

3. Auditor should verify the cost of preparation of all the basic agreements.

4. He should also check the amount of stamp duty and fees paid on the authorized capital.

5. Auditor should also check that cost of registration is according the legal requirements.


VERIFICATION OF WORK IN PROCESS :-
First of all auditor should inquire various information's about the whole system. He should ask about the system of stock checking and price entering. It will be very helpful for the auditor in finding out the exact basis upon which the work in process has been valued. At the beginning auditor should find out the basis of valuation and at the end of the year it should also check that the work in progress is supervised by the responsible officer and it is also checked at each step by the independent person.

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