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Vouching of Telephone Expenses

Vouching of Telephone Expenses

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Published by: adeelfeb on May 11, 2010
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07/10/2013

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MBA (Banking & Finance)Auditing
Introduction of the topic
Vouching:-
According to L. R. Dicksee“Vouching consists of comparison of entries in the books of accountswith documentary evidence in support thereof.”Ronald A. Irish“Vouching refers to the inspection by auditor of documentaryevidence supporting and substantiating a transaction.”Auditors use the word "vouching" to describe a type of evidence-gathering activity auditors apply in the substantive testing stage.Vouching is the process of the auditor matching documentary evidence (of an account balance or a transaction) with the details recorded inaccounting records and provides evidence as to the completeness, validityor accuracy of an account balance, or underlying class of transaction.When an auditor requires evidence of the
validity 
of an accountbalance or class of transaction, the auditor gathers evidence that detailsof the account balance, transaction or economic event recorded in theaccounting records is supported by documentary evidence. i.e. the auditorvouches from the accounting records to the documentary evidence (or a"top down" approach). For example, the auditor obtains evidence relatingto the validity of purchases recorded in a client's inventory records byvouching from details recorded in the inventory records (e.g. thesupplier's name, date purchased, quantity purchased, and the amount of the transaction) to details on suppliers' invoices.When an auditor requires evidence of 
completeness
, the auditorgathers evidence that the account balance, transaction or underlyingeconomic event referred to in the documentary evidence has beenincluded in the accounting records. i.e. the auditor is said to have vouchedfrom the documentary evidence to the accounting records (or a "bottomup" approach). (This "bottom up" approach is sometimes referred to as
tracing
rather than vouching.) For example, the auditor obtains evidencerelating to the completeness of a client's inventory records by tracingdetails on the suppliers' invoices (e.g. the supplier's name, datepurchased, quantity purchased, and the amount of the transaction) to thedetails recorded in the inventory records.When the auditor requires evidence of 
accuracy 
, the auditorvouches from the accounting records to the documentary evidence,although with accuracy, the direction of the vouching is not as critical. Forexample, the auditor obtains evidence relating to the accuracy of a
Page 1 of 11
 
MBA (Banking & Finance)Auditing
client's inventory records either by vouching from details recorded in theinventory records (e.g. date of purchase, unit cost) to details on thesuppliers' invoices or by tracing details on the suppliers' invoices (e.g.date of purchase, unit cost) to the details recorded in the inventoryrecords.Documentary evidence has a variety of sources. Documentaryevidence may be obtained independently of the entity, such as evidenceof the market value of investments, or directly from the entity, such asevidence of the unit cost of inventory. Where it is obtained directly fromthe entity, the documentary evidence may be either externally sourced,as with a supplier's invoice, or internally sourced, as with standard costcalculations. Thus, the
reliability 
of evidence gathered throughvouching is a function of;
inter alia
, the source of the evidence.
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MBA (Banking & Finance)Auditing
Important Sub Topics
Techniques of Vouching:-
At the time of vouching the auditor must keep in mind the followingpoints:
1.
 
Dates and Period
 The dates appearing on different papers attached with the vouchersshould support and correspond with the date as recorded on thetransactions.
2.
 
Correct Allocation
Correctness in allocation of certain amounts can be achieved bythorough examination and scrutiny of documentary evidence attachedwith the main vouchers.
3.
 
Arrangement of 
 
Vouchers
 The auditor must very carefully check the vouchers in the companyunder audit are arranged in the same order as the entries are made in thebooks of accounts.
4.
 
Proper Authorization
All the vouchers must be properly authorized by the competent andresponsible authority of the company. The signature of the authorizedofficers must appear on the voucher and related documents.
5.
 
Agreement of Accounts
 This technique states the fact that the amount stated on thevouchers must be written in both words and figures.
6.
 
Checking of Accounting Heads
 This technique of vouching can be materialized by extensive anddetailed checking of the documentary evidence attached with the mainvoucher.
Page 3 of 11

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