Vouching of Accounting Records | India | Auditing

In this article we will discuss about:- 1. Definition of Vouching 2. Purpose/Objective of Vouching 3. Importance/Advantages 4. Points to be Considered 5. Auditor’s Duties and Liabilities 6. Vouching of Particular Items.

Definition of Vouching:

Vouching means the authentication or verification of entries by examination of documentary evidence or vouchers, e.g., invoices, debit and credit notes, receipts, statements, contracts, correspondence, min­utes and resolutions etc.

Purpose/Objective of Vouching:

It should be clearly borne in mind that no amount of routine checking would reveal serious discrepancies, errors of principle or carefully planned frauds; this type of check­ing is superficial and can detect only clerical and minor errors and establish the arithmeti­cal accuracy of the books, but it can never prove that the entries themselves are in order in all respects.

With a view to achiev­ing this important objective, an auditor must go behind the books of entries and see that they are in conformity with the general nature and policies of the business and that they have been duly authorised.

Importance/Advantages of Vouching:

The major points of importance and/or benefits of vouching are enumerated below:

(a) Helps checking of all book entries duly authorised.

(b) Facilitates detection and prevention of errors, frauds and irregularities.

(c) Imparts credibility and reliability to fi­nancial statements.

(d) Very essence of auditing.

Points to be Considered during Vouching:

In conducting vouching in general the auditor should pay special attention to the undernoted essential points in respect of all vouchers:

(a) Vouchers relating to separate groups of transactions should be serially numbered and filed and readily available for the checking.

(b) All vouchers relating to a particular book of account and covering a particu­lar period of time should be produced at a time to complete checking at one sitting—as far as practicable.

(c) All vouchers should be made out in the name of the client’s business.

(d) Date of each voucher must be within the accounting period under audit and such date must tally with that of the entry in the respective book of account.

(e) The transaction covered by a voucher must be in conformity with the general nature of the client’s business; any unu­sual deviation should be carefully en­quired into.

(f) Each voucher examined must be signed or initialled by a duly authorised official, and should be specially tisked or marked with a view to preventing the produc­tion thereof once again including correc­tions or changes thereon, if any.

(g) All voucher should be produced, in case certain vouchers are genuinely required more than once specially distinctive marks should be put thereon.

Auditor’s Duties and Liabilities towards Vouching:

An auditor should take up vouching seriously and thoroughly and should not pass any entry unless it is supported or sub­stantiated adequately by proper vouchers.

In particular, he should take the following steps:

(a) Insist on simultaneous production be­fore him of all vouchers relating to a particular book of entry covering the period under audit and complete check­ing in one sitting.

(b) Mark all vouchers examined with spe­cial ticks to prevent their production again; in case of genuine need for use more than once use specially distinctive tick marks.

(c) Keep notes of all missing vouchers and, if necessary, demand duly authenticated duplicates.

(d) Also keep notes of vouchers in respect of which further explanations and infor­mation may be considered necessary and get them cleared at the earliest opportunity.

Utmost care and caution must be exer­cised by an auditor in carrying out vouch­ing, particularly when the internal checking systems are non-existent, inadequate or defective.

He should bear in mind that he may be liable for negligence in duty if he:

(i) Does not exercise reasonable care and skill in course of vouching, or

(ii) Fails to detect falsification of accounts through fictitious entries and/or sup­pression of vouchers, or

(iii) Fails to report objectionable or inad­equate vouchers or weaknesses in the internal checking systems.

An auditor’s position as above has been decided in a number of judicial pronounce­ments.

Vouching of Particular Items:

Apart from the general considerations that apply to all vouchers, an auditor is expected to give attention to the special points in respect of each class of vouchers against various groups of transactions.

These are enumerated below: