An auditor tests an entity's policy of obtaining credit approval before shipping goods to customers in support of management's financial statement assertion of Valuation.
In order for the client to be able to repay the firm's credit, the company must verify that the consumer has a suitable valuation. The auditor examines this.
What Is Valuation?
The analytical process of estimating the worth of a company or an asset is known as valuation. There are several methods for performing an evaluation. In addition to other factors, an analyst putting a value on a firm considers the management of the company, the make-up of its capital structure, the likelihood of future profits, and the market worth of its assets.
Although there are other techniques that may be used, such as the capital asset pricing model (CAPM) or the dividend discount model, fundamental analysis is frequently used in valuation (DDM).
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