Chapter: Vouching

Introduction

Vouching is one of the important principles of auditing. It is an important aspect of auditing.

It is a process of auditing. Audit without vouching it shall be incomplete. Vouching is the
backbone of auditing. It tests the truth of the transactions recorded in the account books.
Vouching is done with 'the help of vouchers and supporting documents. To substantiate an
entry in the book, the auditor has to examine the supporting documentary evidences such as
vouchers, receipts, invoices, minutes, contracts, correspondence etc., Vouching also included
routine checking of totals , subtotals, carry forwards posting and checking of ledger accounts.

Objects of Vouching

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.

The following are the main objects of vouching:

1. To examine the account books with the help of vouchers.

2. To examine the authenticity of the vouchers.
3. To ascertain the correctness of the transactions.
4. To check that all the transactions and entries are properly accounted for in the books
of account.
5. To sec that no fraudulent transactions are recorded in the books of account
6. To examine that all entries and transactions are properly authenticated by
responsible persons.

The following points to be considered for importance of vouching in the books of accounts

1. To verify that all transactions recorded in the books of accounts are supported by a
documentary evidence.
2. To check the accuracy and authenticity of the books of accounts.

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 3. Vouching is often regarded as synonymous with a mere comparison of the
documentary evidence concerning each transaction with the entries in the original
books of account.
4. To check the authenticity in all the cases to vouch each and every transaction.
5. Vouching is done intelligently and faithfully. It will be a help in establishing reliability
of profit and loss account and balance sheet.

Voucher

A voucher is a written document in support of an entry in the books of accounts. It is the

documentary evidence to support the various entries in the books of accounts and
establishes the arithmetical accuracy. Certain vouchers may be of primary nature while
others of a collateral or secondary nature.

Types of Voucher

There are two types of vouchers −

Primary Voucher − Original copy of written supporting document is called primary

voucher. Like purchase Bill, cash memo, pay-in-slip, etc.

Collateral Voucher − Copies of supporting documents which are not available in original
are collateral voucher like duplicate or carbon copy of sale invoice.

The following are the examples of vouchers of certain transactions:

Transactions Vouchers

1. Cash receipts Counterfoils of receipts issued, carbon copies of receipts, contracts,

correspondence and letters from the debtors confirming the
balances of their accounts.

2. Cash Paid Original receipts from payee, invoices, bills, demand notes, salary
books, wage sheets, contracts, confirmation by creditors etc.

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 3. Purchases Quotations, Invoices, goods inward register, copies of orders and
correspondence etc.

4. Sales Sales order, sales invoice, and' goods outward books etc.

5. Opening Journal Purchase and sales returns, bills payable and receivables and last
entries year's balance sheet's entries etc.

6. Bank Payments Cheques, counterfoils, bank statements, etc.

The auditor should examine the vouchers presented to him carefully with special
reference to the following points:

1. The name of the party to whom the voucher is addressed.

2. The date and year of the receipt of the voucher. He should see that the dates must
correspond with the cash book, the name of the party to whom the voucher is issued,
the name of the party issuing the voucher and the amount etc.
3. All vouchers have been properly field, serially numbered and arranged in order. It
saves time in finding out a particular voucher for checking.
4. It is the duty of the auditor to see that the voucher is properly stamped. Normally,
·every receipt for more than twenty rupees requires a revenue stamp unless legally
exempted.
5. He should see that every voucher is passed "as in order" by an authorized officer.
6. Amount paid should appear both in words and figures. It will reduce the chances of
alternations of the amount at a later date. If they differ, the matter should be
investigated.
7. He should be careful about the period for which payment has been made. This would
disclose to him to the payment made in advance.

Vouching of Cash Transactions

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Vouching is extensive examination of documents carried out for the purpose of established
the authenticity of the transactions recorded in the books of accounts. Vouching also involves
evaluation of internal checks and examination of internal controls relating to recording of
transactions.

The main objectives of the audit of cash book:

1. To ensure that all receipts are accounted for

2. To ensure that no fraudulent payments have been made;

3. To know that all receipts and payments have been properly recorded; and

4. To verify the cash in hand and at bank.

Vouching of Trading Transactions

Having examined the cash book, the auditor may now, proceed to check the trading
transactions. One of the objects of auditing is to check and prevent misappropriation of
goods. The auditor should see that the client pays for only those goods which have actually
been ordered and received. Before the auditor begins his work, he should examine the
internal check system regarding the purchase on credit, returns outward, etc.

Credit Purchase

After having satisfied himself that there is a good internal check system regarding the
purchase, the auditor should now proceed to vouch the Purchase Book. While examining the
invoice, the auditor should pay attention to the following points:

1. Whether the invoice is in the name of his client.

2. Who is authorized to place orders for Goods?

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3. The date of invoice should relate to the period under review.

4. The auditor should cast a cross casts of the Purchase book.

5. He should see whether trade discount has been deducted from the invoice before making

the entry in the Purchase Book.

Credit Sales

The auditor should now proceed to vouch the Day Book or the Sales Book which records only
credit sales. The auditor has to be more careful in the case of vouching sales, as documentary
evidence is not as conclusive as in case of purchase.

1. He should see that the internal check system is efficient.

2. He should compare the data of the copy of the invoice with the data in the Sales Book.

3. He should see that the sales are not omitted from being entered in the Sales Book.

4. He should further see that the sale of an asset is not treated as ordinary sale, otherwise
profit will be inflated.

5. The cancelled invoice should be checked with the duplicate copy of the invoice.

6. Sales tax, insurance charges, etc, which are recoverable from the customers should be
debited to the customer’s account and credited to the appropriate accounts

Self-Examination Questions

1. What is vouching?
2. Define vouching.
3. What is vouching?
4. What is voucher?
5. How voucher is different from invoice?
6. List out the forms of evidence.

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 7. List out some examples of vouchers.
8. Mention the importance of vouching.
9. What are the points to be considered by an auditor in the course of vouching?
10. What are the objectives of vouching?
11. What are the essentials of a valid voucher?

References:

Sazena, R., Srinivas, K., & Rai, U. (2009). Auditing and business communications. Retrieved
from http://ebookcentral.proquest.com

Principles of auditing an introduction to international standards on auditing second

editionRick hayes ,Rogger Dassen, Arnold Schilder , Philip Wallage, 2004 ,Pearson .

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