Unit 5 vouching

Vouching

1. By Radhika Visiting Faculty J.H.Bhalodia College Unit : 5 - Vouching

2. Introduction Routine checking is one of the primary function of an auditor. Another important function of an audit is Vouching. It is the backbone of auditing. The transactions recorded in the books of a/c are to be compared with the supporting evidences and also to check properly authenticated and approved. Transactions will be vouch by its type eg . Cash, credit purchase, credit sales.

3. Cont. Such credit transactions will be vouch by taking the copies of invoices issued to the customers is taken as a supporting documents. Mere checking and verification is not enough. It is equally important that the cash memos and invoices are properly authorized. Hence the responsible person should sign such vouchers . Thus, vouching is very important, because by vouching the correctness and authenticity of transactions are established.

4. Definition “By vouching is meant the verification of the authority and authenticity of transactions as recorded in the books of accounts.” - B.B Bose “Vouching consists of comparing entries in the books of account with documentary evidence in support thereof.” - Dicksee “Vouching is a technical term, which refers to the inspection of documentary evidence supporting and substantiating a transaction.” -Ronald A. Irish

5. Meaning Vouching is a process. While the documentary evidence used for the purpose of vouching is a ‘Voucher’. Thus ‘vouchers are the documentary or other evidences in support of transactions entered in the books of accounts. The process of comparing or tallying the entries papering in the books of accounts, with supporting evidence like cash memos, receipts and other documents and correspondence is known as vouching.

6. Types of Voucher Primary voucher Secondary or Collateral Voucher

7. Characteristics Examination of entries - by documentary - by other evidence eg . Vouchers, receipts, counterfoils of check book and pay-in-slips, minute books, correspondence 2. Such documentary supports and substantiate a transaction. 3. Ensures correctness and Important aspect of Auditing Preliminary work of auditing

8. Objects To see that all transactions are correctly recorded To see that all transactions recorded are supported by the documentary evidence To ascertain with the help of evidence that all transactions are properly authenticated. To see that necessary vouchers relating to entries recorded in books are with the client. Thus, the purpose of vouching is not merely to verify that the payments have been made, but to verify further that the payment relates to the payments have been made, but to verify that the payment relates to the business and is approved by proper authority.

9. Importance Reliable Examination Examination of Original Evidences Detection of errors at Initial Stage Keeps the Auditor alert

10. Points to be included Serial No. Date Name Address Amount Particulars Approval and signature Revenue stamp Continuous vouching Cancelling the voucher Period Entry in the books of a/c List of missing vouchers

11. Vouching of Cash transactions Cash book is the most important of the books of a/c for any business. The receipts and payments are recorded in cash book. The cash balance on any day can be known from cash book. The entries for receipts and payments of cash are checked with reference to various supporting documentary evidences.

12. Objects To ascertain that all the expenses and receipts are shown under the correct book To ascertain that all the expenses and receipts are shown under the correct heads To ensure there is no unauthorized or fraudulent payments are made To verify that the closing cash bank balance are correctly struck.

13. Vouching the Receipt side of Cash book Vouchers Opening Balance cash book of pre. yr Cash Sales copies of cash memos Cash Received from debtor s receipts, bank pass book Proceeds of Bills Receivable B/R book, pass book Income for Interest and Dividend receipts, Counterfoils Sale of Investments sale deed, receipt Commission Received agreement,sale statement Rent received Rent agreement,receipt Proceeds from sale of scraped machinery plant register Proceeds from sale of Fixed Assets receipt, tender

14. Cont. Subscription received register of members Insurance Claim insurance policy Recovery of claims claim register,cash book Receipts from sale hire purchase hire-purchase agreement Royalty received contract of lease Income of minimum rent lease agreement IT refund return of income, app. Dividend from Receiver receipt, passbook Share Capital sh. App. & allotment book, board’s resoltution Debenture cash book, deb. App., board’s resolution Issue of Right Shares cash book, AoA letter of offer

15. Vouching of the payment side of Cash Book Payments relate to the busi . Only The payment should relate to the year for which the a/c are being audited All payments are properly approved and authenticated by responsible officer Payments are correctly accounted for in the books of a/c No payment should be left unrecorded Amount paid should be correct All payments supported by proper voucher Payment should be made to proper person Particulars should be tally with the books The legality of payment should be verified

16. Vouching of Subsidiary Books Purchase book Purchase return book Sales book Sales return book Bills receivable book Bills payable book Journal proper

17. Journal proper The transactions which are not recorded in the other subsidiary books are entered in the Journal proper. The auditor should vouch these transactions in the same manner as he does in case of cash book transactions. He should see that each entry is supported by supporting voucher. Opening entries Closing entries Rectifying entries Adjusting entries Bad debts Provision for bad debts and doubtful debts Depreciation

18. Vouching of Ledgers