Verification is proving the authenticity of a recorded balance. This is achieved through attempting to prove the assertions made by management in preparing financial statements.

ISA 500 Para 12 “when obtaining audit evidence from substantive procedures, the auditor should consider the sufficiency and appropriateness of audit evidence from such procedures together with any evidence from tests of control to support financial statement assertions”

The auditor must substantiate all the relevant management assertions for each outstanding account balance. He must obtain evidence that the accounts give a true and fair view.

Management assertions

Refer to the topic on audit evidence and ISA 500 Para 13

Financial statement assertions are assertions by management, explicit or otherwise that are embodied in the financial statements. They are categorised as follows

• Existence
• Rights and obligations
• Occurrence
• Completeness
• Valuation
• Measurement
• Presentation and disclosure

The auditor must determine which financial statement assertions are relevant to each account balance and formulate appropriate audit procedures to substantiate these assertions. This implies that not all the seven above mentioned assertions are relevant for all account balances but rather the auditor has to determine which ones are relevant to what account balance. This calls for exercise of judgement. For e.g. for debtors the auditor would be interested in proving;

• The completeness
• The existence
• The valuation

Whereas for plant and machinery the auditor would be interested in proving;

• The existence
• Ownership rights
• Valuation
• Completeness
• Presentation and disclosure

This implies that the audit procedures applied in verifying these two balances will be different.

Liabilities are normally valued at cost unless they involve interest for late payments.