Vouching and voucherVouching and voucherMEANING OF VOUCHINGMEANING OF VOUCHING

The act of establishing the accuracy and authenticity of The act of establishing the accuracy and authenticity of entries inentries in the account books is called vouching. Testing the the account books is called vouching. Testing the truth of items appearing in the books of original entry is truth of items appearing in the books of original entry is vouching. According to Ronald A. Irish of Australia defines vouching. According to Ronald A. Irish of Australia defines : vouching is technical term which refers to the : vouching is technical term which refers to the examination by the auditor of documentary evidence examination by the auditor of documentary evidence supporting and substantiating a transaction. It is consider supporting and substantiating a transaction. It is consider to be the essence of auditing and therefore the auditor to be the essence of auditing and therefore the auditor should be careful while vouching. Finally, vouching means should be careful while vouching. Finally, vouching means not only the documentary evidence but also to see that the not only the documentary evidence but also to see that the transaction has been properly authorized, recorded and transaction has been properly authorized, recorded and entered in the books of accountentered in the books of account

VoucherVoucher

A voucher is a documentary evidence in support of A voucher is a documentary evidence in support of the transaction in the books of account. It may be the transaction in the books of account. It may be receipt , counterfoils of a receipt book , an receipt , counterfoils of a receipt book , an agreement , resolution passed by the board of agreement , resolution passed by the board of director or shareholder and as record in the director or shareholder and as record in the minute books , an invoice bank paying –in slip, minute books , an invoice bank paying –in slip, bought note , sold note , correspondence, gate bought note , sold note , correspondence, gate keeper, wages book, order book etc.keeper, wages book, order book etc.

Following point must be borne in Following point must be borne in mind while examining vouchermind while examining voucher

1 : All the voucher are consecutively numbered and filed 1 : All the voucher are consecutively numbered and filed in order of the entries in the accounts. If the client has in order of the entries in the accounts. If the client has not done ,so the auditor has a right to ask him to do so. not done ,so the auditor has a right to ask him to do so.

2 : He should pay attention to the dates , which must 2 : He should pay attention to the dates , which must corresponded with the cash book, name of the party to corresponded with the cash book, name of the party to whom the voucher is issued with amount.whom the voucher is issued with amount.

3 : The voucher inspected should be cancelled by a 3 : The voucher inspected should be cancelled by a stamp if it is produced again.stamp if it is produced again.

4 : He should see that every voucher is passed as in order 4 : He should see that every voucher is passed as in order by a responsible officer . The signature of the officer by a responsible officer . The signature of the officer should be noted .should be noted .

5:He should also note , whether the voucher is stamped , 5:He should also note , whether the voucher is stamped , if the amount of the voucher is above maximum limit.if the amount of the voucher is above maximum limit.

ContinueContinue 6 : He should also find out the nature of payment as to 6 : He should also find out the nature of payment as to

whether it is relate to the business. whether it is relate to the business. 7Special attention should be given to those voucher which 7Special attention should be given to those voucher which

are in the personal name of one of the partners, directors, are in the personal name of one of the partners, directors, manager or secretary. manager or secretary.

8 : He should see as to which account the payment is 8 : He should see as to which account the payment is posted-revenue or capital.posted-revenue or capital.

9 : Attention should be paid to the amount both in words 9 : Attention should be paid to the amount both in words and figures .If they differ,the matter should be investigatedand figures .If they differ,the matter should be investigated

10: Note should be made of any item which requires 10: Note should be made of any item which requires further elucidation or information which is available from further elucidation or information which is available from partnership deed.partnership deed.

11:Receipted invoice should not be accepted as a voucher, 11:Receipted invoice should not be accepted as a voucher, it is danger for twice.it is danger for twice.

12. If duplicate voucher for a missing one is produced, it 12. If duplicate voucher for a missing one is produced, it should be properly scrutinized. should be properly scrutinized. Q-no 14Q-no 14

INTERNAL CHECK AS REGARD INTERNAL CHECK AS REGARD CASHCASH Before the auditor starts the vouching of the cash book, Before the auditor starts the vouching of the cash book,

he should enquire about the system of internal check in he should enquire about the system of internal check in operation. There are lot chances of misappropriation of operation. There are lot chances of misappropriation of cash if there is no well organized system of inter check. cash if there is no well organized system of inter check. The following system of internal check as regard receipt The following system of internal check as regard receipt and payment of cash is suggested:and payment of cash is suggested:

When cash is received, it should be acknowledged by a When cash is received, it should be acknowledged by a printed receipt which should have a counterfoil or a printed receipt which should have a counterfoil or a carbon receipt. Cashier should not sign receipts and carbon receipt. Cashier should not sign receipts and counterfoils. The receipts should be consecutively counterfoils. The receipts should be consecutively numbered. The unused receipt book should be kept under numbered. The unused receipt book should be kept under lock and key. Spoiled receipts should be cancelled and lock and key. Spoiled receipts should be cancelled and must not be detached from the counterfoils. No blank must not be detached from the counterfoils. No blank counterfoils should be acceptedcounterfoils should be accepted

continuecontinue Remittances should be opened by the cashier in the Remittances should be opened by the cashier in the

presence of a responsible officer who should not be presence of a responsible officer who should not be connected with the cashier’s office. cheques received should connected with the cashier’s office. cheques received should be crossed, Not negotiable-A/C payee only.be crossed, Not negotiable-A/C payee only.

As soon as cash is received, it should be entered in a rough As soon as cash is received, it should be entered in a rough cash book or diary.cash book or diary.

ash registers are very useful for checking receipts. ash registers are very useful for checking receipts. All the receipts of the day should be deposited in All the receipts of the day should be deposited in

the bank at the end of the day or the next day.the bank at the end of the day or the next day. Bank reconciliation statement should be prepared Bank reconciliation statement should be prepared

frequently by the cashier and also by someone frequently by the cashier and also by someone else.else.

The cashier should not have any control over the The cashier should not have any control over the lenders.lenders.

Petty cash should be organized under the impress Petty cash should be organized under the impress system.system.

Objectives of cash book auditObjectives of cash book audit

The main objects of the audit of the The main objects of the audit of the cash book may be summarized thus:cash book may be summarized thus:

1.1. To ensure that all receipts are To ensure that all receipts are accounted for;accounted for;

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

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

4.4. To verify the cash in hand and at bankTo verify the cash in hand and at bank

Continue…Continue… Castings of cash book should be independently Castings of cash book should be independently

checked.checked. Internal control over the preparation of wages Internal control over the preparation of wages

sheets to prevent fraud and manipulation sheets to prevent fraud and manipulation should be exercised.should be exercised.

All payment as far as possible, except for petty All payment as far as possible, except for petty cash, should be made by cheques.cash, should be made by cheques.

The method of recording the cash sales has The method of recording the cash sales has been dealt with below in detail. This is should been dealt with below in detail. This is should be so organized that chances of be so organized that chances of misappropriation are reduced to a minimum.misappropriation are reduced to a minimum.

Cashier should not sanction the payments of Cashier should not sanction the payments of special nature. Directors should do so. special nature. Directors should do so. Question -15Question -15

Internal check as regard credit purchases:Internal check as regard credit purchases:

The system of internal check will depend upon the size of The system of internal check will depend upon the size of the business and the staff available. Whenever goods are the business and the staff available. Whenever goods are required in a particular department, its head should send to required in a particular department, its head should send to the purchasing department the “Purchase Requisition” the purchasing department the “Purchase Requisition” which should show the quality, quantity, if possible the which should show the quality, quantity, if possible the price or the maximum price at which they may be price or the maximum price at which they may be purchased, the time by which the goods must be supplied.purchased, the time by which the goods must be supplied.

1. All the orders sent out should be recorded in the purchase 1. All the orders sent out should be recorded in the purchase order book which should have carbon copies-one to be order book which should have carbon copies-one to be sent to the supplier and the other to be retained for sent to the supplier and the other to be retained for reference purposes.reference purposes.

Another point:Another point:

2. when the goods are received, the gate-keeper or the 2. when the goods are received, the gate-keeper or the store-keeper should make an entry in the goods inward store-keeper should make an entry in the goods inward book.book.

3. the invoice should be checked with the goods inward 3. the invoice should be checked with the goods inward book maintained by the store-keeper to see that the book maintained by the store-keeper to see that the goods are correctly recorded in the store-register goods are correctly recorded in the store-register according to the invoice.according to the invoice.

44. A clerk should check the invoice regarding calculations.. A clerk should check the invoice regarding calculations.

5.Invoice should be sent to the head of the dept. who 5.Invoice should be sent to the head of the dept. who placed the order for goods to see whether the prices placed the order for goods to see whether the prices and qualities are correctly recorded in the invoice.and qualities are correctly recorded in the invoice.

Continuing…Continuing…

6. The departmental head will now pass on the invoice 6. The departmental head will now pass on the invoice to the clerk who will record the same in the purchases to the clerk who will record the same in the purchases book.book.

7.Every person who has to deal with the invoice and 7.Every person who has to deal with the invoice and the goods should initial the invoice.the goods should initial the invoice.

8. Goods inward book should be compared with the 8. Goods inward book should be compared with the purchases book.purchases book.

9. He should see that the name of the creditor is the 9. He should see that the name of the creditor is the same as has been entered in the “Particulars” column same as has been entered in the “Particulars” column of the purchases book. Question 24, 27**of the purchases book. Question 24, 27**

Internal check regarding credit salesInternal check regarding credit sales

sales are two types cash sales credit sales.sales are two types cash sales credit sales. whenever an order is received , it should be recorded whenever an order is received , it should be recorded

in the order received book and such things should be in the order received book and such things should be written , the date of order , the name of customer ,the written , the date of order , the name of customer ,the name of goods and the date of delivery , mode of name of goods and the date of delivery , mode of transport etc.transport etc.

A copy of it is sent to despatch department.A copy of it is sent to despatch department. When the despatch department has packed the goods, When the despatch department has packed the goods,

another clerk should compare goods with ordering another clerk should compare goods with ordering goods which is sent to counting house .goods which is sent to counting house .

A responsible official mark at this stage at which rate A responsible official mark at this stage at which rate the goods are to be chargedthe goods are to be charged

ContinueContinue The invoice will be made in duplicate or triplicate The invoice will be made in duplicate or triplicate

by means of carbon papers.by means of carbon papers. One copy of invoice will be sent to invoice clerk One copy of invoice will be sent to invoice clerk

to keep sales book and later it is sent to to keep sales book and later it is sent to customer , another copy will be sent to customer , another copy will be sent to gatekeeper to record goods outward book and gatekeeper to record goods outward book and 3rd copy will be retained for further reference. 3rd copy will be retained for further reference.

If orders are received through travelers , they If orders are received through travelers , they should be given order books with triplicate should be given order books with triplicate copies, one copy has to be handed over to copies, one copy has to be handed over to customer, 2nd copy has to be sent head office customer, 2nd copy has to be sent head office and 3rd copy is to be retained by traveler for his and 3rd copy is to be retained by traveler for his record. record. QQuestion 25uestion 25

Loophole to make fraud regarding wageLoophole to make fraud regarding wage

The chances of fraud or errors are:The chances of fraud or errors are:

a)a) The inclusion of fictitious name of dummy workers in the The inclusion of fictitious name of dummy workers in the wage book;wage book;

b)b) Errors or fraud in time and piece-work records;Errors or fraud in time and piece-work records;

c)c) Possibility of clerical errors;Possibility of clerical errors;

d)d) The name of the employees who have resigned or The name of the employees who have resigned or dispensed, may have been included in wages sheets;dispensed, may have been included in wages sheets;

e)e) Over stating of wage rate; Understatement of deductionOver stating of wage rate; Understatement of deduction

f)f) Conversion of unpaid wages;Conversion of unpaid wages;

g)g) Over footing of pay roll sheets; page -85Over footing of pay roll sheets; page -85

Auditor’s duty as regard wagesAuditor’s duty as regard wages He should see whether the internal check system is He should see whether the internal check system is

satisfactory and there is no loophole for any fraud.satisfactory and there is no loophole for any fraud. He should check the casts of the wages sheets.He should check the casts of the wages sheets. He should check the calculation here and there.He should check the calculation here and there. He should check the amount with cheque drawn.He should check the amount with cheque drawn. To identify the dummy worker he should check the job To identify the dummy worker he should check the job

card, foreman and gate-keeper’s register.card, foreman and gate-keeper’s register. He may pay a surprise visit on the day of payment of He may pay a surprise visit on the day of payment of

wages and check the identity card.wages and check the identity card. Wages sheet should compare with previous sheet.Wages sheet should compare with previous sheet. Number of worker should compare with Insu card&PFNumber of worker should compare with Insu card&PF Test check the signatures and thumb with previous m.Test check the signatures and thumb with previous m.