Chapter 4 - Vouching * Vouching * Principles of Vouching * Techniques of Vouching * Objectives of Vouching * Procedures of Vouching

Introduction
It means to test the truth of items appearing in the books of original entry. It is an important part of an auditor's duty to certify as correct the transactions recorded in the looks of accounts. The Accountant of a business is responsible for passing entries in the books of prime entry. The question arises how and on what basis such entries have been passed. The auditor's primary duty is to check these entries and only then certify the accounts as correct and free from any error or fraud.

Definition A careful examination of all original evidence such as invoice receipt of correspondence minutes, contracts etc. Vouching is very useful in proving the accuracy of the entries in the books of accounts. It also indicates about that transaction, which is omitted from the books of account.

Importance Vouching is called the essence of auditing. So audit is not possible without vouching. The object of vouching is to find out the accuracy of the entries appearing in the books of accounts and detect that no entry has been omitted from the books of account.

Principles of Vouching 1. Arranged Voucher In the books of accounts the vouchers are based an entry. A voucher is helpful to support any transaction, which may be cash memo fill, voucher, ticket or others.

2. Checking of Date

The voucher date can also be checked; it must be related to the current year. The date of the last or future year must not be adopted.

3. Checking of Authority The vouchers are considers correct only when the proper authority signs on them. For the approval of the dealing the owner or the management must put the signatures for the approval of dealing if the vouchers are without the signatures of the proper authority. They are not considers the true.

4. Cutting or Change There should be no changes in the vouchers. Any person for making the fraud can change the time, date, amount and name of concern. So, these changes cannot be acceptable till the approval authority has made the signature.

5. Compare the Words and Figures The auditor should satisfy himself amount written on the vouchers, it figures and words are same or not.

6. Transaction Must Relate to Business For the correctness of the vouchers it is necessary that it relate with the business. Concern, the vouchers must be in the name of the business and also the manager. If it does not the vouchers are not acceptable and doubtful.

7. Case of Personal Vouchers The auditor should not accept the voucher in personal name. There is a chance than an officer of the company has purchased any item in his personal capacity.

8. Checking of Account Head Auditor must be satisfied about the head of account in which cash is deposited and drawn. He should examine the documentary evidence in these regards.

9. Revenue Stamps For the stamps, the stamps act 1899 is applicable while fixing the revenue stamps. The stamps are required according to the valuation of the amount or cash memo. There is no need of vouchers if amount is less than twenty rupees.

10. Case of Cancelled Voucher The auditor should not accept the cancelled vouchers because it has already served the purpose of payment. There will be a danger of double payments, if it is accepted.

11. Important Notes For finding the correct decision, the auditor can also take help from the working papers of the previous year and others paper or note related to business and available with the management.

12. Minutes Book When the meeting of shareholders is held. All the resolutions and decisions of the directors and shareholders are recorded in the minute's book. This minutes book must be examine by the auditor. He has to check that these decisions have been implemented in the books of accounts or not.

13. By Laws In case of company the article of association and memorandum are basically the rules and regulations. But on the other hand in the societies and clubs the by laws are used to determine the powers of management. The auditor goes through these rules and regulations to find the true and fair view.

14. Agreements The auditor must examine all the related papers of the business such as the agreement, correspondence and others. The basic information can be received to the auditor by such papers.

15. Deed of Mortgage Some times, you are the sale or purchase of any assets, the management can enter into the agreement is prepare in this case. If the agreement is prepare in this case. If the agreement is made for a loan against the immovable property then the mortgage deed is signed. It is compulsory for the auditor to study the content of the deed.

Techniques of Vouching 1. Correct Accounts The auditor can check the accounts debited and credited are correct in all respects. The

rules of debit and credit can be followed for dividing the transactions into accounts.

2. Agreements The auditor must examine the agreements, correspondence and other papers relating to business activities. Such agreement provides basic information to the auditor. He can vouch the transactions based on such agreements.

3. By-Laws The memorandum and articles of association are rules and regulations in case to company. The by-laws of societies and clubs and used to determine management power. The auditor has the right to go through these rules and regulation.

4. Mortgage Deeds The management may enter into agreement with any party for the purpose and sale of assets. The deed or agreement is prepared. In case of loan against immoavable property mortgage deed is signed. The content of deed must be situated.

5. Minutes Book The auditor should examine the minute's book. The resolution and decision of directors and shareholder are recorded there. He can see that such decision have been implemented in the books of accounts. Objectives of Vouching 1. Proper Evidence The purpose vouching is to note that proper evidence is available for every entry. The signatures, initials and rubber stamp are evidence that document has been authorized and checked.

2. Proper Authority The purpose of vouching is to note that there is proper authority behind every transaction. In the absence of any signature of manager the transaction are not acceptable at all.

3. Right Period The purpose of vouching is to check that date of the vouchers relate to accounting period. The adjustments in books are made on the basis of current year record of

transactions.

4. Correct Amount The purpose of vouching is to check that correct amounts have been recorded in the entry. The vouching is useful to record only correct amounts in the books of accounts.

5. Capitals and Revenue Analysis The purpose of vouching is to examine the analysis of transaction into capital and revenue. The expense relating to one year is treated as revenue other wise it is called capital.

6. Purchase for Business The purpose of vouching is to check that purchase relate to the nature of business. The private purchase cannot be recorded as business due to vouching.

7. Arithmetical Accuracy The purpose of vouching is to see the arithmetical accuracy of books of accounts. The auditor to confirm that books are accurate can check the total subtotals, casting and posting.

8. Postings The postings of total from journal to the ledger can be voucher by the auditor. He can see through vouchers that posting are complete and correct.

9. No Error The purpose of total vouching is to check that there are no errors in the books of accounts. The errors are the result of carelessness or over work. But audit staff is not over loaded so they can locate error.

10. No Fraud The purpose of vouching is to examine that no fraudulent payments are made. The fraud can be committed due to matching of minds of employees and customer. The auditor can vouch the entries top disclosed such frauds.

11. Castings

The purpose of vouching is to check castings or loads. The auditor can calculate all total by himself. He can compare the totals with books to maintain accuracy.

12. Cast at Bank The purpose of vouching is to determine true cash at bank. He can vouch receipt and payments. The result is that he can check whether cashbook is correct or not.

13. Cash Balance The purpose of vouching is to check that cash in hand figures are facts. The cash can be counted. He can compare it with cashbook. He can apply test checking to determine accuracy.

14. Reporting The purpose of vouching is to form an opinion for the purpose of reporting. In case of true and fair view there is good report. In the absence of such result there may be qualified report. Procedures of Vouching 1. Reading Out The vouching is a task of the auditor. The junior audit can read out the contents of the vouchers. He can inform the senior auditor about the data name of organization, number of voucher and amount of vouchers.

2. Comparison The senior can head the contents called out by junior auditor. He tally each and every item stated in the voucher with entries in the books of accounts. Thus comparison is a part of vouching procedure.

3. Ticking The senior auditor can use various ticks or symbols to clear the items checked. The ticks may be an abbreviation of words. Such ticks or symbols may differ from auditor to auditor because these are code words.

4. Stamping The senior auditor instead of signature or initials he can use stamps for checking the

vouchers can use the rubber stamps. The rubber stamp may have the wording checking and cancelled on it.

5. Signatures The senior auditor can vouch the entries with the help of vouchers. He can put his signature or initials on every voucher for safety measures. The signed vouchers cannot be presented again for another entry.

6. Query The voucher may be missing. The entries may be doubtful due to over writing and erasing. The audit staff can make the word "Q" against such entry. This entry is recorded in working papers.

7. Management The audit staff can be giving sometime to the management for clearing the objections. The doubtful entries are handed over in written form. The management can examine the record in detail.

8. Reply The management may reply after one or two days about the doubtful entries. The auditor can examine the reply of the managers. The auditor can judge whether the reply is right or wrong.

9. Clearance The audit staff can clear the query for which proper answer is made available. The auditor may not be satisfied with the answer of objections. He can inform the management about this query.

10. No Satisfactory The auditor may reject the unsatisfactory reply. He has skill, training and experience. He can use all available means to test the truth. He can note down poor clarification in working papers.

11. Objections The objection stated in the working papers can be discussed with the management at the end of audit. He can form an opinion on the basis of such objections. He can submit

his report either clear or qualified.