Vouching in accounting is a technique used by an auditor to establish the authenticity of transactions mentioned in the primary books of account. It does not take note of non-business transactions. This helps the auditors ensure that all business-related transactions are recorded in the books of accounts. The auditors check and verify if all the transaction amounts are genuine and confirm the nature of a transaction. The article will provide information regarding accounting vouchers in-depth. Show
The Concept of Vouching in AccountingCash memos, payslips, receipts, and counterfoils are vouchers that document the transactions in the books of accounts. These transactions are recorded if substantial evidence is available, and accountants need several documents to prepare a voucher, used as an evidentiary document. The following documents should be available to prepare the voucher in order to record a purchase transaction:
Also read: What is the Difference Between Auditing and Accounting? - Learn Auditing and Accounting Types of Vouching in AuditingThere are two types of vouchers:
Documents and bills present in the original form are referred to as primary vouchers.
The bills that are available as duplicates are known as collateral vouchers. Sources of VouchersThe sources of the voucher are:
A company makes the internal vouchers—for example, a sales invoice.
External vouchers like a bank statement are prepared outside the organisation. Examples of Vouching in AccountingSome vouching examples are:
Cash PaymentsVouchers relating to cash payments include - Invoices, demand notes, bills, wage sheets, salary registers, counterfoils, agreements and others. Cash ReceiptsThe cash receipt vouchers include - carbon copies of contracts, receipts, correspondences, minutes, and counterfoils. SalesThe sales vouchers include copies of the invoice, goods outward book, orders received, and correspondence. PurchasesExamples of purchase vouchers are invoices, copies of orders placed, goods inward book, and correspondence. Also read: What is Fair Value Accounting? Fair Value Meaning, Calculation & Advantages The Objectives of Vouching in AuditingAuditors vouch to ensure the authenticity of transactions recorded in the statement. The procedure followed during vouching and the accuracy adopted are important as they will decide whether the audit is successful or otherwise. The objectives of vouching are:
Importance of Vouching in AccountingAn audit is based on the documents made available to an auditor by the business owner or an authorised person. The documents provided must be related to the organisation's business activity for the financial year. If any bills related to purchasing, sales, telephone, electricity, and others not associated with the business are not attached, they indicate that vouching is done accurately. Vouching must be performed efficiently and effectively to detect frauds (if any). It is the auditor's responsibility to ensure the records are accurate with accurate calculations. Vouching should be done accurately and strictly while preparing the balance sheet and profit and loss statement. If the primary documents contain discrepancies, the final records will display a wrong result, and the audit will not be successful. Characteristics of Vouching AccountingFollowing are the characteristics of vouching:
Vouching is a necessary part of auditing, and it makes the auditor's job simpler, and detected discrepancies (if any) come to light.
Vouching is the base of the auditing process. Correct vouching of the provided documents is necessary to ascertain the accuracy of further accounts maintained by the auditor.
Vouchers are documented evidence showing that transactions occurred during the company's business activities.
Vouchers also aid in disclosing any fraud recorded in the books of account.
Vouchers provide information that makes it easy to differentiate between personal and business transactions. The auditor only considers the business transaction vouchers while preparing the profit and loss statement.
An auditor can identify any transaction besides business transactions and eliminate them.
The date mentioned in the voucher shows the timeline of a transaction. Also read: What Are Different Types of Accounting Explained With Examples & Importance Procedures for Vouching AccountingThe steps involved in vouching procedure are given below: Step 1 - Reading Out During the auditing process, the junior auditor can read aloud the voucher number, amount and other details, which will speed up the process, making it easier and quicker. Step 2 - Comparison Comparison is a part of the vouching process. The senior auditor tallies the items mentioned in the voucher with the entries mentioned in the books of account. Step 3 - Ticking Ticking is used to mark the items which have already been checked. They can be in the form of abbreviations or symbols. Step 4 - Stamping Instead of signatures or initials to check the vouchers, the senior auditor can use rubber stamps mentioning the words checking, cancelled and other instructions. Step 5 - Signatures The entries can be vouched for by the senior auditor signing the vouchers. The signed vouchers cannot be presented or used again for another entry. Step 6 - Query When a voucher is missing, or the entries in a voucher raise a question due to overwriting, the audit team can mark each entry with a “q”. This is recorded in the working papers. Step 7 - Management The team hands over doubtful entries to the management. The management can examine the record in detail and clear the objections. Step 8 - Reply The management may take a couple of days to reply. The auditor can then decide if the explanation is valid. Step 9 - Clearance In case the answer is satisfactory, the query is cleared. If the auditor is dissatisfied with the answer, they can inform the management about the same. Step 10 – Unsatisfactory Explanation The auditor can reject an explanation and try further to find out the truth. The query is noted in the working papers as poor clarification. Step 11 - Objections After the audit is completed, any objections mentioned in the working papers are discussed with the management. The auditor can form his opinion based on this and submit his audit report. Also read: What Is Branch Accounting? Learn About Branch Accounting Types & Examples ConclusionWe hope this article has helped provide information about vouching for accounting. Vouching is an important part of accounting. The auditor inspects vouchers or documented information to verify the credibility of transactions. The accuracy of the audit report depends on the accuracy of vouching. Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting. Disclaimer : What is voucher what points are taken into account while examining it?Voucher is known as the evidence in support of a transaction in the books of account. It may be bill, receipts, requisition form, agreement, decision, bank paying slip etc. The act of examining documentary evidence in order to ascertain the accuracy of entries in the account books is called "Vouching".
What is voucher explain with an example?A voucher is a bond of the redeemable transaction type which is worth a certain monetary value and which may be spent only for specific reasons or on specific goods. Examples include housing, travel, and food vouchers.
What are the points an auditor should look into when examining vouchers?Date, Name, Amount, etc.: The auditor should check date, name of the party to whom the voucher is issued, the name of the party issuing the voucher, and the amounts, etc. 5. Cancelled by Stamp: The vouchers, which are inspected by the auditor, should be cancelled by a stamp so that it cannot be produced again.
What are the points to be noted by the auditor while vouching the voucher?POINTS TO BE NOTED WHILE VOUCHING
Auditor must verify the authenticity of transactions, accuracy of amount recorded and proper classification of account. 2. All the vouchers are numbered serially and dated. To avoid wasting of time in locating a voucher, they have to be arranged serially.
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