III B.COM(CA) - VI SEMESTER :: AUDITING // 55 \\ UNIT -4 VOUCHING & INVESTIGATION 1. What is meant by Vouching? What are its objectives and importance? (Or) ‘Vouching is the essence of auditing’ – explain? Ans.: Introduction: Vouching means testing the truth of items appearing in the books of original entry. It is considered to be the essence of auditing and therefore the auditor should be very careful while vouching. Vouching means to substantiate an entry in the books of accounts not only with documentary evidence but also to see that the transaction has been properly authorised, recorded and entered in the books of accounts. Vouching - Definition: “Vouching consists of comparing entries in the books of accounts with documentary evidence in support there of”. — DICKSEE It means the checking of the correctness and authenticity of the transactions. Vouching -Objectives: 1) All transactions relating to the business have been properly recorded in the books of accounts. 2) To verify that all transactions recorded in the books of accounts are supported by a documentary evidence. 3) Every tranasactions recorded has been adequeteiy authenticated by a responsible person. 4) The vouchers have been carefully processed through each stage of an effective system of internal check. 5) The vouchers have been properly authorised. 6) Whether accuracy has been observed while totaling carrying forward and recording an amount in the accounts. IMPORTANCE OF VOUCHING:Vouching is the most important work of an auditor. It helps the auditor to verify the validity, accuracy, authority and authenticity of the transaction recorded in the books of accounts. It helps the auditor to detect even clerical frauds. It is the foundation of auditing, actually it is the very essence of auditing. The success of auditing depends to a great extent upon intelligent and efficient vouching. The auditor therefore, should vouch the entries with great care and intelligence, he should use all his intelligence, common-sense, observation and tact in doing vouching.
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III B.COM(CA) - VI SEMESTER :: AUDITING // 55 \\
UNIT -4
VOUCHING & INVESTIGATION
1. What is meant by Vouching? What are its objectives and importance? (Or) ‘Vouching is the
essence of auditing’ – explain?
Ans.: Introduction: Vouching means testing the truth of items appearing in the books of original
entry. It is considered to be the essence of auditing and therefore the auditor should be very careful
while vouching. Vouching means to substantiate an entry in the books of accounts not only with
documentary evidence but also to see that the transaction has been properly authorised, recorded and
entered in the books of accounts.
Vouching - Definition: “Vouching consists of comparing entries in the books of accounts with
documentary evidence in support there of”. — DICKSEE
It means the checking of the correctness and authenticity of the transactions.
Vouching -Objectives:
1) All transactions relating to the business have been properly recorded in the books of accounts.
2) To verify that all transactions recorded in the books of accounts are supported by a documentary
evidence.
3) Every tranasactions recorded has been adequeteiy authenticated by a responsible person.
4) The vouchers have been carefully processed through each stage of an effective system of internal
check.
5) The vouchers have been properly authorised.
6) Whether accuracy has been observed while totaling carrying forward and recording an amount in
the accounts.
IMPORTANCE OF VOUCHING:Vouching is the most important work of an auditor. It helps the
auditor to verify the validity, accuracy, authority and authenticity of the transaction recorded in the
books of accounts.
It helps the auditor to detect even clerical frauds. It is the foundation of auditing, actually it is
the very essence of auditing.
The success of auditing depends to a great extent upon intelligent and efficient vouching. The
auditor therefore, should vouch the entries with great care and intelligence, he should use all his
intelligence, common-sense, observation and tact in doing vouching.
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2. Explain the principles of Vouching?
Ans.:Vouching -Definition: “Vouching consists of comparing entries in the books of accounts with
documentary evidence in support there of”. — DICKSEE
Vouching - Principles : The following are the principles of vouching:
1. Arranged voucher : 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 considered correct only when the proper authority signs
on them. For the approval of 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
considered as true.
4. Cutting or change: There should be no changes in the vouchers. Any person making the fraud can
change the time, date, amount and name of concern. So, these changes cannot be acceptable till the
approval authority have signed.
5. Compare the Words and Figures: The auditor should satisfy himself the amount written on the
vouchers, its figures and words are same or not.
6. Transaction must relate to business:For the correctness of the vouchers it is necessary that it
relates 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 bot accept the voucher in personal name. There is
a chance that 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 this regard.
9. Revenue stamp : For the stamps , the stamp act 1899 is applicable while fixing the revenue stamps.
The stamps are required according to the valuation of the amount or cash memo.
10. Case of cancelled voucher : The auditor shod not accept the canceled vouchers because it has
already served the purpose of payment. There will be a danger of double payment, if it is accepted.
11. Important Notes: To arrive the right decision, the auditor can also take help form the working
papers of the previous year and others paper or not related to business and available with the management.
12. Minutes Book : When the meeting of shareholders is held. Al the resolutions and decisions of
the directors and shareholders are recorded in the minutes book. The minutes books should be examined
by the auditor. He has to check that these decisions have been implemented in the books of accounts
or not.
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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 bylaws 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: Sometimes, 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.
3.What is meant by voucher? What are different types of vouchers?
Ans.:Vouching -Definition: “Vouching consists of comparing entries in the books of accounts with
documentary evidence in support there of”. — DICKSEE
“A voucher is documentary evidence in support of a transaction”
—— Arthur W. Holmes
Vouchers – kinds: Vouchers can be classified into two kinds :
1. Primary Vouchers : written evidence in original concerning an entry is known as Primary Voucher.
E.g.: cash memo for cash purchase is a primary voucher.
2. Subsidiary / Collateral Vouchers : In certain cases, evidence in original regarding a transaction is
not available. To prove, the ruth and correctness of the transaction, either a copy of the original evidence
or some other document which can pro e the correctness of that transaction is made available to the
auditor for audit purpose. Such evidence is known as Subsidiary / collateral Voucher. E.g.: When the
receipt for payment of a purchase on credit is lost, carbon copies of the sales invoice can be produced as
subsidiary evidence.
3. Other types of Vouchers :
i. Regular Voucher: Regular vouchers are used for regular voucher entry. Regular vouchers are also
used when there is a need to replenish the petty cash fund.
ii. Template Voucher: Template Vouchers are created by using a standard template to provide an
efficient means of entering data for vouchers.
iii. Adjustment Vouchers : Adjustment vouchers can be used to adjust existing vouchers, to associate
two vouchers to each other, as well as to enter credit and debit memos that reference purchase orders.
This can enter adjustment information manually or can copy the voucher that wants to adjust right into
the adjustment voucher.
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iv. Journal Voucher: Journal vouchers are used to correct the distribution information on a voucher
after the voucher has been posted, payment posted and paid. This type of voucher will always net to
zero.
v. Reversal Voucher: The Reversal Voucher will be used to restore the encumbrance on a PO and
reversing the PO’s matched quantity or amount for an unpaid Voucher. Specifically, if the voucher was
entered in error and needs to be unposted, unmatched and closed, the state will use the Reversal Voucher.
vi. Single Payment Voucher : Single payment vouchers are used to enter a voucher for one-time
vendor without adding rows to the vendor table.
4. How do you vouch the payment side of the cash book?
Ans.:Vouching of Payments side of the cash book : The following are the general things observed /
checked by the auditor while vouching the payments:
1. He should see that the transaction is authorized.
2. He should observe that the payment made is for personal purpose or for the business.
3. He should check that the transaction/payment belongs to the particular financial year.
The following are the special inquiry made by the auditor while vouching the payments: