What is Vouching?
Vouching is concerned with examining documentary evidence to ascertain the authenticity of entries in the books of accounts. In other words, it is an inspection by the auditor of evidence supporting the transactions made in the books. https://www.resilience-engineering-association.org/login/
Vouching is a procedure followed in the process of the audit to authorise the credibility of the entries entered in the books of accounts to check the correctness and accuracy of such documents.
Vouching is a procedure that auditors use to authorize the credibility of the entries allowed in the books of accounts that helps the auditors to check the authentication and the accuracy of the documents that the client has presented.
Objectives of Vouching:
1. All the transactions which are connected with the business have been recorded in the books of accounts properly.
2. To verify that all transactions recorded in the books of accounts are supported by documentary evidence.
3. The vouchers which support the entries are legally valid from the view point that they are authentic, addressed to the business and properly dated.
4. To verify that no fraud or error has been committed while recording the transaction in books of accounts.
5. The vouchers have been processed carefully through various stages of internal check system.
Importance
1. Vouching Is the Backbone of Auditing
Main aim of auditing is to detect errors and frauds for proving the true and fairness of results presented by income statement and balance sheet. Vouching is only the way of detecting all sorts of errors and planned frauds. So, it is the backbone of auditing.
2. Vouching Is the Essence of Auditing
Auditing not only checks the accuracy of books of accounts but also checks whether the transactions are related to business or not. All the transactions https://ingrid.bike/ are performed after the prior approval of concerned authority or not, transactions are real or not because an accountant may include fictitious transactions to commit frauds. All these facts can be found with the help of vouching. So, vouching is essential for auditing.
3. Vouching Is Important to See Whether Evidences Are Correct or Not
An auditor checks the books of accounts to detect errors and frauds. Frauds may be committed presenting duplicate vouchers. All the small and big amounts of frauds can be detected with the help of vouching. So, all the evidential documents and records are to be checked carefully and in detail by an auditor which is the scope of vouching.
Vouching of Cash Transactions and Trading Transactions
Vouching of cash Transactions:
How to vouch various cash receipts (Receipt side)
- In vouching cash sales, cash register should be fully checked with carbon copies of cash memos. Then, the auditor should verify the daily deposits of cash received in the bank dates of the cash and the date on which the receipts are recorded in cash book must be same. Where the cash memos are cancelled, all copies including the original copy duly cancelled should be kept in the book. Where a company has a discount policy, if more discount is allowed in a transaction, it must be approved by a responsible officer.
- The auditor should verify amount received from debtors from the counterfoils or carbon copies of the receipt issued to the customers. All these receipts should be serially numbered. Amount should be entered in the cash book on the day when received. Discount allowed to customers should be authorized by a responsible officer. Sometimes correspondence made with customer can also be verified.
Vouching of cash payments (payment side):
- good purchased are actually received by store keeper. Cash memos can be compared with goods inward book to verify the goods received. Only the net amount (after trade discount) should be entered in the books.
- Should be examined with the receipts issued by the creditors. The receipts should indicate the purpose for which the payment has been made. If the payment is made in full and final settlement of account, the balance should be accounted for as discount received. Where the payment is made in excess of the bill, either the excess payment is in advance or the payment is made by mistake, which should be recovered back from the creditor. https://en.wikipedia.org/wiki/Vouching_(financial_auditing)