There are two
main functions of the based on vouching evidences.
·
Collection
of evidences; Through observation. Confirmation, inspection, inquiry.
·
Evidences
of evaluation; Relevance, adequacy and validity.
Objective of Vouching
·
Whether
all the business transactions are properly record in the book of accounting.
·
Whether
recording transactions are duly supported by documentary evidences.
·
Vouching
of documentary evidence is authenticated and related to business transactions.
·
Transactions
are free from errors or fraud.
·
Whether
voucher is process through all the stages of internal check system properly.
·
Accounting
transactions to check the accuracy.
Importance of Vouching
Auditor’s
duty forms the base for auditing and has an important part of vouching.
Vouching in the case of negligence, the all responsible will be held on auditor;
he cannot run from his duties, if auditor has done vouching carelessly.
Following points of the importance of vouching.
·
In
the books of accounting the vouching is equally important as passing of original
entry. The books of accounting, if original entry is wrong, it will be affected
on the process of accounting entry and its impact will be the end of the results.
Vouching is the base of all auditing process.
·
The
success of auditor vouching will be decided.
·
If
internal control system exists, the auditor may choose to do test checking
instead of completing vouching.
Vouching and Routine Checking
·
Routine
checking covers the checking of every carry forward, posting to ledger accounts
and balancing of account. Routine checking which is a mechanical checking, as
vouching is made on the basis of documentary evidences. In a vouching and
routine checking Sales bill, purchase
bill, payment receipt, pay-in slip, etc. The type of all documentary evidence
are known as vouchers.
Two types of Vouchers
·
Primary
Voucher; Written copy of original supported documents is called primary
vouchers. Purchase bill, pay-in-slip, cash memo, etc.
·
Collateral
Voucher; Supporting documents of copies which are not available in original are
collateral voucher like carbon copy or duplicate of sales invoice.
Examples of voucher
Transactions;
·
Sales
Vouchers;
·
Goods
outward register, cash receipt, sales order, sales invoice, bank pay-in-slip,
etc.
Transactions;
·
Purchase
Sales;
·
Goods
inward register, purchase orders, purchase bills, etc.
Transactions;
·
Cash
payments
Sales;
·
Note
demand, cash receipt, cash memo, etc.
Transactions;
·
Cash
received
Sales;
·
Carbon
copy or duplicate of cash receipt, contracts and correspondence with pay, etc.
Transactions;
·
Bank
payments
Sales;
·
Cheques,
counterfoils, bank statements, etc.
Transactions;
·
Payments
received through banking channels.
Sales;
·
Bank
deposit slip, bank statements, etc.
Vouching Regarding Important Points are;
·
Transactions
of accuracy. Transactions of authenticity. Accounts of proper classification.
·
Arrangements
of vouchers accordingly and voucher should be properly numbered serially. Voucher
should be tick marked with the sign on every checked.
·
Vouching
regarding amount of receipt should be same in words and in figure. Payment
should be there on receipt of period.
·
“Advanced
payment” if it is do than, receipt should be clearly mention. To investigate
the books of accounting and checked, if they are in the name of director,
manager, partner or any other employee of the company.
·
Voucher
should be there by any responsible officer of the company to verify that proper
certification. About missing voucher in file if any investigation. Voucher must
be authenticated by concerned officer in every alteration.
·
At
once in one sitting for a particular period of time, vouching should be complete. By the auditor all the
expenses should be examined. Auditor should not opt for test checking without
existence of adequate internal control system in organization.
·
The
classification of accounts must be done and checked. Once in cash purchased and
second one in credit purchase, cash purchased should not be recorded twice.
·
For
certain transactions an auditor should refer the resolution as passed at the
meeting. Auditor should verify that accounting entries are done on the basis of
capital and revenue stamp.
Verification of Vouching
To vouching, verification adds an extra layer, refers to the
inspection of assets appearing in the balance sheet part of financial
statements and ensuring that assets are recorded as per legislation. On the
general approach auditor will have made a decision to be taken to the audit
work. The amount of verification work will be reduced, if internal control are
effective and working properly. The verification procedures would be more
substantive, if internal controls are not functioning properly. Make the
verification, the auditor needs to gather evidence that will lead to a
conclusion if classes of transaction, balances and disclosures in the financial
statements are properly stated or not.
Examples of Verification
·
Verification
auditor should examine title deed of land and building. Land and building
should be according to the title deed. As per title the name of the owner shall
be checked if the promoter hold the property.
·
In
the account, profit or loss on sale of it should be duly adjusted.
·
The
auditor shall be take care of the same diligently, if any addition is made
during the year.
To the Verification Regarding Auditor’s Duty
Appearing the balance sheet, he has to fairly ascertain and
examine the correctness of assets and liabilities. While he verifying the
assets the auditor has to keep in mind certain aspects are;
·
Ensuring
are existence of assets.
·
Possession
of assets and legal ownership.
·
Valuation
of assets are proper ensuring.
·
Free
from any charge ensuring the assets.