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VOUCHING &

VERIFICATION
Ms. Fleur Dsouza
Asst. Prof., BMS
SIES College
VOUCHER
O A voucher is evidence to any expenses
done. It is a written record against any
expenditure or completed transaction.

O Sales invoice, cash memo, purchase


invoice, bank pay-in slips are examples.
DEFINITION OF VOUCHING
According to Spicer and Pegler,

“Vouching is the examination by the auditor


of all documentary evidences, which are
available to support the authenticity of the
transaction entered in the client’s record.”
AUDIT OF EXPENSES
PAYMENT OF TAXES
O Check copy of assessment order,
assessment form, notice of demand,
receipted challan
O Payment of tax to be verified by
acknowledgement receipt
O Interest earned on advance income tax to
be recorded as income
O Any interest or penalty due to non-
payment of tax should be debited
CUSTOMS DUTY
O Check Bill of Entry and Payment Receipts
O If duty is paid by agent, then bills issued
by clearing agent for his charges should
also be checked
O In case of dispute regarding duty amount,
a provisional amount is paid. Later,
additional amount payable or refund of
excess amount should be accounted for.
O If imported goods are exported, verify
whether duty has been refunded.
EXCISE DUTY
O Amount of duty paid should be according
to quantity of goods allowed under the
permit
O Check triplicate copy of the TR-61GAR-7
challan for excise duty paid
O Current account with excise authorities –
check advance permit quantity with
quantity of excisable goods actually
issued
TRAVELLING EXPENSES
O To be approved as per rules formed by directors or
partners
O If no such rules, reimbursement as per amounts
actually incurred
O Travelling expenses should be incurred for business
benefit, not personal reasons
O All travel voucher must contain name of traveller,
journey details, amount of fare, boarding and lodging
expenses, daily allowances
O Foreign travelling expenses should be approved first
and then spent
O Supporting proof to be provided for each expense
incurred
PRELIMINARY EXPENSES
O Stamp duty, legal costs, printing costs, registration
fees paid during creation of the firm
O Reimbursement to promoters should be verified
through resolution passed by BoD and power of
Articles of Association
O Each expense should be verified with supporting
attachments and contracts
O Excess amount paid under any head compared to
amount disclosed in prospectus should have
approval of shareholders
O Part of preliminary expenses not written off to be
disclosed separately
O No other expenses should be recorded under this
head.
SALARIES AND WAGES
O Verify salary and wage bill with attendance
registers, schedules of rate, class and position of
workers, and employees and payment sanctions.
O No payment to dummy workers
O Proper deductions like leave pay, PF, ESI, TDS has
been considered
O Mode of payment to be verified – ESOP, cash
,cheque, etc.
O Disbursement – confirm that payment is made and
entered into account. Undisbursed amount should
be recorded as unpaid salary and wages.
O Tax liability to be checked
O Loan and advances given to employees – verify
recovery and outstanding
PETTY CASH
O Verify amount sanctioned to petty cashier
O Expenses should be supported by expense
vouchers, receipts or documents
O All expenses to be allocated according to
their heads eg. Travelling, stationery,
O Total of heads should match with total
expense amount
O Verify the cash balance in hand
RESEARCH AND
DEVELOPMENT EXPENSES
O Verify nature of R&D expenses
O Routine expenses of R&D to be written off
to P&L A/c
O Verify that the research is relevant to the
objective and it is authorised by the Board
O Any asset purchased for R&D purpose,
depreciation should be debited to R&D A/c
O Tax benefits to be taken into account in
creating tax provision
ADVERTISEMENT EXPENSES
O Verify whether capital, revenue or
deferred
O Verify if regular contract with ad agency
O If advertisement is done, verify by
checking newspapers, hoarding,
magazines, TV ad and radio showing the
date and exact location
O Check receipts for amounts paid for ads
O Outstanding expenses to be disclosed in
liability side of balance sheet
AUDIT OF INCOMES
CASH BOOK
O Only indirect evidence can be obtained for
incomes
O Guard against omission of cash receipts
O Compare opening balance of cash book
with closing balance shown in audited
balance sheet of previous year
CASH SALES
O Check carbon copies of cash memos with
salesmen’s summaries and cashier’s
abstracts.
O Trace total of daily cash sales in the cash
sales book
O If paid by cheque, check pass book
CASH RECEIVED FROM
DEBTORS
O Persons handling receipts should not take
part in preparation and sending out of
statements to debtors
O Receipts issued and entries in Cash Book
should match
O Auditor can ask for the payment statement
from debtors
O Bank statement can also be vouched
CAPITAL RECEIPTS
O Sale of plant, machinery, investments
O Vouch sale proceeds with contracts of
sale, correspondence, other documents
O Proceeds less any expense incurred
should be fairly accounted for
PROCEEDS OF BILLS
RECEIVABLE
O Check cash received from bills discounted
or matured with the Bills Receivable book
O If any bill is dishonoured, see that reverse
entry is made
O Drawee to be charged with dishonour
charges and original balance
INCOME FROM INTEREST
AND DIVIDENDS
O Interest received from FD or RD in bank
should be vouched with Bank Passbook
O Genuineness of Pass Book to be
ascertained
O Dividends received checked from
counterfoils of dividend warrants or letters
covering cheques
O Interest received on securities vouched
from securities or from the investment
ledger
COMMISSION
O Vouched with the account of the parties
from whom commission is or is to be
received.
O Agreements regarding rate of commission
can be inspected
SALE OF SCRAP
O Auditor to confirm that the life of the
assets is finished and it has become total
scrap
O Use assets register and fixed assets
schedule for vouching
MISCELLANEOUS RECEIPTS
O Rents,
O Income from hire purchase agreements,
O Bad debts recovered,
O Insurance claim money,
O Subscriptions,
O Contributions
O Share capital, etc.
Relevant evidence like leases, receipts,
correspondence, agreements, etc.
VERIFICATION
MEANING
Physically examining assets and liabilities to
check –
O Value
O Ownership
O Title
O Existence
O Possession
O Free from any charge
PLANT & MACHINERY
O Obtain detailed list of all P&M and asset-wise
accummulated depreciation
O Check Opening Balance with last year’s annual report
O For purchase of P&M, verify quotations, invoices, etc.
Related expenses should be duly capitalised.
O For sale, verify relevant invoice. Check authorisation of sale
and value report. Proper accounting of profit or loss due to
sale of P&M
O Verify resolution regarding purchase and sales of P&M
O Self-constructed – verify amount of material, labour and
other expenses are capitalised.
O Check rate and calculation of depreciation, as per Section
123 of Companies Act, 2013
O Physical verification by obtaining register and personal visit
to workplace
O Check whether all disclosures made in balance sheet as
per Companies Act
O P&M kept abroad – obtain certificate from a local auditor
O IMPORTED PLANT AND MACHINERY
O Verify RBI’s permission and import license
O Check entries in books of accounts
O Examine Directors’ Minute Book for resolution
regd authorising the purchases
O Vouch the bills related to purchase, custom
duty payment, clearing and shipping charge,
insurance premium, etc.
O If asset purchased on credit, check credit
terms
FREEHOLD LAND &
BUILDING
O Keep freehold separate from leasehold
O Balances shown in balance sheet should be easily
traceable from those ledgers
O Title deed should be genuine, in name of the client
and has free and fair possession of the client
O Building is constructed – Builder’s certificate,
contractor’s certificate, architect’s certificate, local
authority certficate should be verified
O In case of sale – verify documents of sale
O Property under mortgage – obtain Certificate of
Mortgage
O Land is not to be depreciated
O Building to b depreciated at proper rate
O Check physical existence of the asset
FURNITURE, FIXTURES AND
FITTINGS
O Funriture – movable –chairs, tables, etc.
O Fixtures - fixed to the ground
O Fittings – fitted on the wall
O Check if register properly maintained
O Balances of register properly posted to balance
sheet
O Depreciation charged as per Companies Act, 2013
O New purchase – verify quotations, orders,
invoices, authorisation, physical verification of
asset
O Sales – verify authorisation and entries
O Accounting treatment of profit or loss on sale
O Assets on lease – verify lease agreement
MOTOR VEHICLES
O Verify the chedule of vehicles
O Verify registration book of each vehicle. Check
insurance paid on vehicle
O Valued at cost less depreciation
O Rate of depreciation
O Sale as scrap – verify auctioneer’s statement,
valuer’s report. Profit or loss on sale properly
accounted
O Physical verification of each vehicle by inspecting
registration numbers,
O In case R/C book is lying with lender, verify the
certificate from lender
GOODWILL
O Method of goodwill creation
O Verify opening balance from last year’s
audited balance sheet
O If there was no opening balance, verify the
value from the agreement of purchasers
of business, minute books, etc.
O Physical verification not possible
O Not to be depreciated, if any amount
written off then find out the reason
INVESTMENTS
O Obtain schedule of investments –
purchase date, book value, market price,
rate and date of interest, tax deducted,
etc.
O Dividends received – check counterfoils of
dividend warrants
O Long term investment – valued at cost
price, short term investment – cost price
or market price, whichever is less
O Check investments in balance sheet
O Investment certificate not received – examine
transfer deed, broker’s contract note
O Investment given to bank for safe custody –
obtain certificate from bank
O Held by trust – verify trust deed
O Investment in subsidiaries – Disclosure
requirements of Section 133 of Companies Act
to be complied
O Investments should be in name of client
O Investments made should not be contrary to
provisions of Section 186 of Indian Companies
Act, 2013
PATENTS
O Check Certificate granting the patent
O If patent is purchased, check assignment deed.
Deed should be registered in name of the client
O Verify voucher, pass book, agreement,
authorisation, etc.
O Fees paid to purchase patents to be treated as
capital expenditure. Renewal fees are revenue
expenditure.
O If several patents, obtain list of patents with
date of acquisition, cost, etc.
O Depreciation as per Companies Act– show in
Balance sheet as cost minus written off amount
TRADEMARKS
O Right to own the brand and protect it from
imitation
O Points similar to Patents
COPYRIGHTS
O Rights to produce or reproduce any
creative work
O Points similar to Patents
SUNDRY DEBTORS
Debtors to be classified as per Companies Act, 2013

 Debtors outstanding more than 6 months
 Other Debtors –
• Debtors good and secured
• Debtors good but only personal security
• Bad or doubtful debts
• Debts due by directors or other officers of the
Company
• Debts due by firms or private companies in which
any director is a partner or director or member
• Debts due from other companies under same
management
O Obtain Sundry Debtors list and compare with ledger
accounts
O Verify opening balance from last year’s balance sheet
O Verify Provision for Bad Debts, Provision for Discount to
Debtors, are properly made
O Verify vouchers, minutes book to verify bad debts
written off are correct or not
O Credit balance in debtor’s account not to be deducted
from debit balance. Show credit balance as liability.
O Verify any dispute regarding balance from debtors
O Send letters to debtors to confirm their balance
outstanding. Replies should be sent to auditor’s office
directly.
O Check if any unrecorded debtors – check cut-off date for
transactions for deciding whether debtor is of current
year or next year
STOCK IN TRADE
O Consists of stores and spares, raw materials,
WIP and finished goods
O IF stock is overvalued, profit is inflated; if
undervalued it creates secret reserves
O Check gatekeeper’s outward register to find out
any fictitious sale entered in Sales Book
O Verify balance of Stock Register with the Stock
sheets
O Verify same principle of valuation of stock is
followed every year (eg. LIFO, FIFO, etc.)
O Verify obsolete, slow-moving, non-moving and
damaged items and their treatment in accounts
CASH IN HAND
O Count the cash on date of Balance Sheet in front of
cashier
O Cashier should deposit all cash, except petty cash,
into bank account
O In case of temporary advances, verify the delays
O If physical cash does not tally with Balance sheet
amount, CA to issue qualified report
O If cash could not be counted on last day of the year,
CA may count on another day .Check cash book
entries from last day of accounting year till cash
counting date.
O Get certificates from branch auditors regd. Cash
balance in hand and their correctness
O Ensure quantum of mutilated notes/coins is not very
large and that they are exchanged at the earliest.
CASH AT BANK
O Compare Cash Book and Pass Book
O Prepare Bank Reconciliation Statement
O Obtain letter of confirmation from bank
O Verify that ‘charges not yet collected’ are
genuine and not made up in order to
conceal the deficiency
CREDITORS
O Check accounts of creditors and compare
with the Purchase Ledger
O Compare the accounts with the invoices,
receipts, credit notes and statements
O Check entries in Goods Inward Book and
compare with Purchase Ledger
LOANS TAKEN
O Verify Memorandum of Association and
Articles of Association to verify borrowing
power of the company
O Check Resolution of directors for obtaining
loan
O Verify if loan is secured or unsecured
O Verify assets mortgaged against loan
O Obtain confirmation from lending institution
regd. Amount of loan, security, interest, etc.
O Verify interest and principal paid and payable
The above slides are for reference only. For
full content, please refer text book.

Students have to read up on all the


incomes, expenses, assets and liabilities
given in text book. Only some heads have
been covered in this ppt.