Auditing Unit 4

7/25/2019 Auditing Unit 4

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Unit -4Vouching

Lalatendu MishraJain University


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Vouching

Vouching consists of comprising entries in booksof account with documentary evidence insupport thereof

the processing system to find the sourcedocumentation that supports the transaction


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Objective of vouching authority and authenticity of transactions

Genuinely connected to the business

Documentary evidence Pertain to financial year, related to business

unit


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Difference between routine checkingand vouching

Arithmetical accuracy Documentary evidence

Vouching does notinclude routine

checking

outine checking is apart of vouching


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Difference between routine checkingand vouching

!unior audit clerk "enior audit clerk

#lerical error as well aserrors of principles

#lerical error


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$ypes of voucher Primary vouchers:

-written evidence in original

%evidence of a transaction or an entry e&ample'purchase invoices, cash memos of goodpurchased, statement prepared by the banketc(

Collateral / secondary

%copies of original evidence e&' carbon copies ofa cash memo and rent receipts, counterfoils of

a pay%in%slip


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#ash "ales Examine cash book:

daily cash sales summary and copies of cashmemos

examine cash memos

%price, discount allowed and rates of sales ta&

%the salesmen)s summery to cashier)s cash salessummary and the gate keeper)s goodsdelivered summary

%whether the dates on cash memos and cash

sales summery are the same


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#ash "ales Examine the counterfoils of pay-in slips

%e&amine the counterfoils with reference to cashsales summery

Routine checking:

%arithmetical accuracy of cash memos, cashsales summery and gate keeper)s goods

delivery summery

%ensure posting to correct accounting heads, inparticular , amount collected as sales ta& to

sales ta& amount


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Vouching cash receipt from the

debtors%#ounterfoils of receipts%auditor should en*uire in to thesystem of

internal check

%people who is maintaining the debtor)s ledgershould not be allowed to collect money fromthe customers

%the customers should not handover cashdirectly to the cashier

%verify the cash book


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Vouching cash receipt from the

debtors People who handle remittance should not takepart in the preparation and sending out ofstatement of account to debtors


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Vouching of receipts from billsreceivable

Receipt from bills discounted

% the amount received should be checked' cashbook, pass book and bills receivable book

%proper records in case of bills discounted

%determine the contingent liability in respect ofbills discounted

Receipts from bills matured

%cash received' comparing the bills receivablebook with the cash book and pass book


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Vouching of receipts from billsreceivable

%matured but unpaid ' dishonored, might havebeen paid and the amount has beenmisappropriated


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eceipts from sale of investmentsand building

+nvestment sold through brokers' contract noteactual amount, commission

#heck with related investment account and

stock market *uotation +nvestment and Dividend ' apportion between

capital receipt and revenue receipt

Profit and loss on sale of investment isproperly adjusted

-roker note or auctioneer note


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eceipts from sale of investmentsand building

#apital profit' capital reserve account, not P./A0#


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Vouching #ash Purchase

#ash memos, invoice, goods inward book

Discount

Voucher missing' duplicate copy

Goods paid for have actually been received

Purchase duly authori1ed

$he amount paid is debited in the appropriateaccount


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Vouching Payable to #reditors

Vouched with the receipts issued by thecreditors

Amount due and goods received with the

invoices 2ntries in goods inward book and stock

register

Vouchers have references of bill against whichpayments are made

Verify periodical statements of accounts

3o double payment for same supplies


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Vouching of bills payable

#ash book and bills payable return

+f paid through bank e&amine bank passbook

-ill payable paid and returned by the payeesare cancelled


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Vouching of Payment for purchaseof fi&ed assets

Properly authori1ed

Documents relating to purchases and theownership

Documents e&amined by the solicitor

+nvoices and receipts obtained from thesuppliers


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Vouching of deferred revenuee&penditure

3on%recurring e&penditure

2&pected to be of financial benefit to severalaccounting year

Preliminary e&penditure, cost of issue ofshares and debentures, underwritingcommission, brokerage on issue of shares etc(

Auditors duty%understand the nature of business


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Vouching of deferred revenuee&penditure

Only e&ceptional revenue e&penditure

Policies regarding writing off

verify the amount off portion


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Vouching of preliminary e&penses

Preliminary e&penses is also calledpromotional e&penses

+ncidental to the creation or flotation of a

company 2&ample' cost of printing memorandum of

association, articles of association, legale&penses incurring in draft in thememorandum, stamp duty, registration fee,cost of company)s seal


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Vouching of preliminary e&penses

uties of auditor:%only connected to the creation or flotation of the

company

%should not e&ceed the amount stated in theprospectus

%not entirely debited to profit and loss account


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Vouching cost of issue of share anddebentures

Provisions of companies act

Advise to the management to write off the cost

4rite off amount is debited in the profit andloss account

3ot written off should be shown in the balancesheet under the head miscellaneous

e&penditures and losses


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Vouching of underwritingcommission

Articles of association ' underwritingcommission is authori1ed or not

Provisions of #ompanies Act

3ot e&ceed the prescribed limit

"hown in the balance sheet under the head5miscellaneous e&penditure6

#ontract has been filed with the registrar ofcompanies


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Vouching of Purchase book

#ontains only credit purchase

Also known as bought book or bought journals

3ame of the creditor

+nvoice in the of client and date

Authori1ed person

3ot capital goods Purchase book entry


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Vouching of sales book

#redit sales

2valuate the system of internal check

3ot sales of capital goods

#ompare with original record' sales invoice,order received book, goods outward book etc

Discounts ' unusually high or low


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Vouching of bills receivable

+ndividual customer account in the subsidiaryledger should be traced

Overdue must be discussed with the

management -ills receivable should match with the total of

bills not matured on hand


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Vouching bought ledger

A ledger contains the creditors account Vouched with the help of Purchase register,

purchase return book, cash book and bills ofpayable

Opening balance' audited previous yearbalance sheet

$otal schedule of creditors should agree withthe balance shown in the correspondingcreditor)s ledger adjustment account in thegeneral account


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Vouching bought ledger

Goods in transit must be recorded and theamount of the party must be credited

+f goods are not received, the amount paid inadvance may remain as a debit balance


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Vouching !ournal Proper

2ntries which can not be passed through anyother of original or prime entry are passed tojournal proper

Auditor should check

%every entry has a narration

%the transaction has been authori1ed by aresponsible officer

%the transaction has been supported bydocumentary evidence


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Opening entries' checked with reference toprevious year)s audit

#losing entries' checked with reference toaudited closing balance of the general ledger

$ransfer entries'one ledger to another ledgerproper authori1ation direct transfer should notbe made

ectification entries' the details of actualmistakethoroughly checked with evidence authori1ed by a responsible officer


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Adjusting entries' e&amine that entries arerelating to this period


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