Definition in the words of J.R.Batliboi , “Vouching means testing the truth ofitems appearing in the books of original entry”
From the definition it is clear that, A voucher is a documentary evidence in support of a transaction in the books of accounts. Vouching is used to find out the accuracy and efficiency of entries in the books of accouts.in other words vouching can be regarded as the backbone of auditing.
To ensure that transaction are acceptable (ie.valid) To ensure that all the entries are made with evidence To see that all the transactions are recorded and nothing is left out Non business transaction are ignored Detection of frauds and errors
It ensures accuracy of books of accounts It helps the auditor to ensure transactions recorded in the books are relating to business only It helps the auditor to record all the transactions It helps the auditor to go behind and beyond the books of accounts It helps the auditor to proceed with his work smoothly It ensures that transaction is valid or not
Opening balance Cash sales Receipts from debtors Income from interest, dividends. Rent received Bills receivable Commission Sale of investments Bad debt dividends Sale of fixed assets income from hire purchase
Cash may not be recorded in books and cash may be misappropriated Discount allowed may be over stated Cash sales may be under-recorded Cash sales may be recorded as credit sales to fictitious debtors Fictitious entries for sales return may be made Receipts from customers may not be recorded Good debts may be recorded as bad debts Deposits into banks may be over stated Deposits of cash may be delayed
Auditor has to carefully examine the system of internal check Auditor can go into test checking He should compare rough cash book with original cash book He should examine the methods of depositing daily receipts He should check the bank pass book with the entries in the cash book He should vouch cash receipts by reference to evidence He should note that all the receipts are in printed forms He should enquire the bad debts written off
The vouching procedure in regard to cash sales (i.e the vouching of cash sales by an auditor) should be on the following lines He should examine the system of internal check in operation in regard to cash sales After ascertaining the efficiency of internal check he should vouch the cash sales as follows 1. Cash memos of each and every salesman should be checked at the end of the day 2. He should compare the summary of daily sales of the salesman with cash analysis of the receiving cashier. 3. He should examine the rough cash book 4. In case there is automatic cash register in use he should check daily totals entered in cash book 5. The summary of daily sales should be checked with the entries in stock register 6. He should verify the daily deposit of cash received into the bank