Contemporary Auditing: Unit 2 - Vouching

Contemporary
Auditing
Unit 2 – Vouching
Meaning
• "The act of examining documentary evidence in order to ascertain the
accuracy and authenticity of entries in the books of accounts is called
Vouching."
-Spicer and Pegler
• Vouching means a careful examination of all original evidences that is
invoices, statements, receipts, correspondence, minutes, contracts etc,
with a view to ascertain the accuracy of the entries in the books of
accounts and also to find out, as far as possible that no entries have
been omitted in the books of accounts.
Definition
• Vouching means testing the truth of items appearing in the books of
original entry.
• Vouching is an act of comparing entries in the books of accounts with

documentary evidence in support thereof.
• Vouching is the examination of the evidence offered in substantiation of

entries in the books, including in such examination the proof, so far as
possible, that no entries have been omitted from the books.
Importance of Vouching
• Backbone of Auditing – Vouching is the only way of detecting all sorts of
errors and planned frauds. Hence it is the backbone of auditing.
• Essence of Auditing – Auditing checks if transactions are related to

business or not. It checks for fictitious transactions created for committing
frauds. All these facts can be found with the help of vouching. So, vouching
is essential for auditing.
• To check whether evidences are correct or not – Frauds may be committed

presenting duplicate vouchers. Evidential documents or records are to be
checked carefully which is the scope of vouching.
• Proper evidence – It acts as an evidence for the entries recorded in the
books of accounts. It is the work of vouching to ensure that proper
evidence is available for every entry.
• Proper authority – To verify proper authority behind every transaction.

Transaction is not accepted without signature of concerned manager.
• Cash balance – It is conducted to check if the cash in hand is correct. To

count cash and compare it with cash book.
• Helps to detect frauds – Success of an audit will depend on the efficiency

with which vouching has been applied during the process of auditing.
Various frauds can be detected only if vouching is conducted in a proper
manner.
• Arithmetical accuracy – To maintain arithmetical accuracy of books of

accounts.
Differences between Routine Checking & Vouching
1. It is the checking of costing, 1. It is checking of the validity,
carry forwards, postings and authenticity and accuracy of
balancing. the entries in the books of
2. Concerned with checking of accounts.
arithmetical accuracy of 2. Concerned with an
books of original entry. examination of documentary
3. Narrow concept which evidences /vouchers with
involves merely checking of entries in books of accounts.
books of accounts. 3. Broader concept which
involves not only checking
books of accounts but also
verifying source of transaction
with the entries made.
Differences between Routine Checking & Vouching
4. It is a simple & mechanical 4. An intelligent checking of
checking of books of entries. books of entries with scrutiny
5. It does not include of documentary evidences.
vouching. 5. Includes routine checking.
6. Arithmetical accuracy of 6. Genuineness of entries, real
the entries in the books of accuracy of entries in books of
accounts is ascertained. accounts is ascertained.
7. It reveals only minor 7. Reveals both minor as well
frauds. as clever and well designed
8. Reveals only clerical errors frauds.
and not errors of principle. 8. Reveals both clerical errors
and errors of principle.
Types of Vouchers
• Primary Vouchers – When written evidence is available in original, it is known as
primary vouchers. (Purchase invoices & Cash receipts)
• Collateral Vouchers – When evidence in original is not available. Copies of such

evidences are made available for the purpose of audit. These documents are
known as collateral vouchers. (copy of demand draft, counterfoil of pay-in slip
etc.)
• Internal Vouchers – Vouchers originating within the organization are known as
internal vouchers. (Sales invoices & material requisition slip)
• External Vouchers – Vouchers originating from outside sources are known as

external vouchers. (Mortgage deed & bank statement)
EXAMINATION OF VOUCHERS/ PRINCIPLES OF VOUCHING
1. Auditor should see that all the vouchers are properly filed, serially numbered and arranged
date wise. He should also obtain duplicates of lost or missing vouchers.

2. He should pay attention to the dates, which must correspond with the cash book, name of the
party to whom the voucher is issued, the name of the party issuing the voucher and the amount, etc.

3. The transactions must be in conformity with the nature of the client’s business. All unusual
transactions must be carefully enquired into.

4. Missing vouchers should be carefully noted and brought to the knowledge of the owner of the
business.

5. All vouchers must be checked and passed for payment by some responsible official. Similarly
any alteration in the vouchers must also be supported by a responsible official.

EXAMINATION OF VOUCHERS/ PRINCIPLES OF VOUCHING
6. All
the receipts of the day should be deposited in the bank at the end of the day or the next
morning.

7. Bank reconciliation statement should be prepared frequently by the cashier to verify the bank
balance with cash book and pass book. He should also examine the reasons for the difference
between the bank balance as per pass book and that in the cash book.

8. All payments as far as possible, except for petty cash, should be made by cheques or online. If
large amounts appear to have been paid in cash, contrary to the usual practice of the business, auditor
must ascertain the circumstances in which it was considered necessary.

9. Auditor should ascertain that the vouchers have been correctly posted to the appropriate
accounts and distinction has thoroughly been observed between capital and revenue expenditure.

10. Auditor should ascertain that the cashier do not sanction any payments of special nature without
proper approval from the directors.
THANK
YOU !!!

Contemporary Auditing: Unit 2 - Vouching

Uploaded by

Copyright:

Available Formats

Contemporary Auditing: Unit 2 - Vouching

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Contemporary Auditing: Unit 2 - Vouching

Uploaded by

Copyright:

Available Formats

Contemporary

• Vouching is an act of comparing entries in the books of accounts with

• Vouching is the examination of the evidence offered in substantiation of

• Essence of Auditing – Auditing checks if transactions are related to

• To check whether evidences are correct or not – Frauds may be committed

• Proper authority – To verify proper authority behind every transaction.

• Cash balance – It is conducted to check if the cash in hand is correct. To

• Helps to detect frauds – Success of an audit will depend on the efficiency

• Arithmetical accuracy – To maintain arithmetical accuracy of books of

• Collateral Vouchers – When evidence in original is not available. Copies of such

• External Vouchers – Vouchers originating from outside sources are known as

You might also like