What is Vouching and its Importance

What is Vouching and its Importance Introduction Voucher is a documentary evidence in support of a transaction i books of account, vouching refers to the inspection by the auditor documentary evidence supporting a transaction. Broadly speaking, vouching means the examination of every business transaction with its supporting documentary evidence) Vouching enables the auditor to satisfy himself the roaches. Receive the transaction is in order and has been correctly entered in the books d accounts. Vouching includes routine checking as well. Definition of Vouching "Vouching is a technical term, which refers to the inspection by the auditors, of documentary evidence supporting and substantiating a transaction". (Ronald A, Irish ) Characteristics and features Method of Examination: Vouching is a method of examination of accounting records with the help of documentary evidence. Supported by Voucher: Voucher method Complete In vouching it is ascertained that every entry in the books of accounts is supported by a voucher and no voucher has gone unrecorded in the books. Concerned with Business: In vouching it is ascertained that the transaction is concerned with the business. Correct Amount: In vouching it is ascertained that the amount involved in the transaction has been correctly recorded. Appropriate Account: In vouching it is ensured that the entry has been Right made them. Objectives of Vouching Proper evidence: The objective of vouching is to make sure that proper evidence is available for all entries made in the books of accounts. Proper Authority: The objective of vouching is the verification of proper authority for every transaction recorded in the books of accounts. In the absence of authority such as signature of a responsible officer, the transactions are not acceptable. Related Business: The objective of vouching is to ascertain that the transactions recorded in the books of account are related to the business of the client. Arithmetical Accuracy: The purpose of vouching is to check the arithmetical accuracy of books Correct Account: The purpose of vouching is to check that the accounts debited credited with respect to each transaction are correct. Correct Record: The objective of vouching is to examine that the transaction has bee correctly recorded in the books of accounts." Recipient and payment: The purpose of vouching is to ensure that all receipts and payment have been properly recorded in the cash book ad no fraudulent payment has been made. Fraudulent Transaction: The vouching is done to check that no fraudulent transaction has been recorded in the books of account. Proper Allocation: The purpose of vouching is to check that proper distinction has bee made between capital and revenue items while recording transaction the books of original entry. Reporting: The objective of vouching is to form an opinion about the accounting record for reporting to the management. Importance of Vouching: Vouching is an important aspect of auditing. Auditing without vouching is Incomplete. Vouching is the essence of auditing. Vouching is the first and most important step in auditing. Vouching is considered backbone of auditing as it is one of the most powerful tools in the hands of auditor. De Pauls the expert of auditing has rightly stated It will not be wrong to say that vouching is three fourths (3/4) of auditing Vouching has larger and vital importance in auditing as shown by the In vouching, the accounting record is compared with documentary following point. Detection of Frauds: Careful vouching helps the auditor to detect frauds like miss appropriation of cash or manipulation of accounts; however committed. Prevention of Errors and Frauds: In the course of vouching, the auditor can easily detect errors and frauds. The fear of detection of errors and frauds will prevent the commission of errors and frauds. Alteration Not Possible: In vouching all entries are checked. Special tick marks are used by auditor. Thus, alteration in figures after vouching becomes impossible Detailed Checking: All vouchers are compared with entries in the books of original record. Thus, vouching provides a chance of detailed checking of accounting records. Proper Authority: Vouching helps to examine the proper authority for every transaction recorded in the books of account. In the absence of proper authority the transaction is considered doubtful. No Omission: Vouching is a useful tool in the hands of auditor to check that there is no omission of any business transaction. In vouching all entries are checked. The omission can be traced easily. Actual Transaction: Under vouching, recording of fictitious transactions is eliminated. Thus, vouching helps to records only actual transactions. Verification and Assets liabilities: Vouching helps the auditor to verify the assets and liabilities organization. Fraudulent Transaction: In the process of vouching all vouchers are compared with entries in journal and posting into ledgers. Thus, vouching ensures that no fraudulent transaction has been recorded in the books of accounts. Completeness of Transaction: It is through vouching that an auditor can satisfy himself as to the correctness and completeness of transactions in the books of accounts. Successful Completion of Audit work: The success of audit process depends on vouching. A careful vouching process helps the auditor for successful conduct and completion of audit work. The success of an audit depends upon the efficiency with which vouching is completed