Vouching in Audit
Vouching is an important part of the process of audit. The success of an auditor in vouching depend upon his intelligence, critical bent of mind, common sense, observation and tact with which he handles his work. He should go beyond the books of account and go to the source of a transaction. Clever frauds can be discovered only by proper vouching. It is through vouching that an auditor can satisfy himself as to the authenticity and completeness of transactions in the books of accounts.
Vouching – its meaning
A voucher is a documentary evidence in support of a transaction in the books of account. It may be a receipt, counterfoil of a receipt book, an agreement, resolutions passed by the Board of Directors or shareholders and as recorded in the minutes, an invoice, bank paying-in-slip, etc.
The act of establishing the accuracy and authenticity of entries in the account books is called vouching. Vouching is considered to be the essence of auditing and therefore the auditor should be very careful while vouching. Vouching means to substantiate an entry in the books of accounts not only with documentary evidence such as agreements, receipts but also to see that the transaction has been properly authorized, recorded and entered in the books of account. Vouching also means checking of additions, ledger postings, extracting of balances in the ledger, etc. The extent to which the auditor should check will depend upon the size of the business, the accounts of which he is auditing.
While examining the vouchers, the following points must be kept in mind –
1. All the vouchers are consecutively numbered and filed in order of the entries in the accounts.
2. The auditor should pay attention to the dates, which must correspond with the cash book, name of the party to whom the voucher is issued, amount etc.
3. The vouchers must be cancelled by a stamp otherwise there is a possibility that they may be produced again.
4. Special attention should be paid to those vouchers which are in the personal name of one of the partners, directors, managers, secretary etc., as such a voucher may not relate to the business. In such a case, original invoice, inward book, etc., should be checked to find out whether the goods are purchased for the purpose of business or for the individual to whom the voucher is addressed.
5. The auditor should see that every voucher is passed by a responsible officer and signature of such officer should be noted.
6. The auditor should check whether the voucher is stamped.
7. The auditor should find out the nature of the payment and if it relates to the business.
8. The auditor should also find if the transaction is a capital or revenue expenditure and find out if it is correctly posted.
9. Attention should be paid to the amount mentioned both in words and figures. if they differ, the matter should be investigated.
10. If duplicate voucher is produced, it should be properly scrutinized to avoid any fraud.
11. While examining the vouchers for insurance, rent, rates and taxes, the auditor should note the period for which the payment has been made. Adjustments need to be made for advance and prepaid expenses.
Vouching in Audit
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