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This e-Lecture was Recorded on

:
September 29, 2014

Intermediate (IPC) Course
Paper 6 Auditing and Assurance

Chapter 5 : Vouching Part 1/6

CA. N Raja Natarajan

© The Institute of Chartered Accountants of India

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• This lecture has been delivered by faculty members to supplement the Study
Material, Practice Manual and other content
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• The views expressed in this lecture are of the Faculty Member.
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• The content of this video lecture has not been specifically discussed by the
Council of the Institute or any of its Committees and the views expressed herein
may not be taken to necessarily represent the views of the Council or any of its
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© ICAI, 2014 2

This e-Lecture was Recorded on:
Important Note September 29, 2014

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© ICAI, 2014 3

Learning Objectives Vouching General Considerations – Verification – Cash Transactions Internal Control Systems Accounting Principles Evidence of Transactions / Validity of Transactions © ICAI. 2014 4 .

2014 5 . Relevance – Exam Perspective Questions of 12 Marks on the Average © ICAI.

© ICAI. Vouching An Intro. 2014 6 .

2014 7 .Vouching Examining Vouchers Audit Vouching Practice Authenticity © ICAI.

Vouching 2 Examining/ Documentary Evidence Vouching Consists Authority Appropriate Account © ICAI. 2014 8 .

2014 9 .Essential aspects in examining voucher Date of Voucher/ Within Accounting Period Adjusted Accounts/ Client’s name Clearly Disclosure Essential Aspects Complete Duly in all respect Authorized © ICAI.

General Considerations in Audit of Cash Transactions An Intro. © ICAI. 2014 10 .

Audit Of Cash Transactions – General Considerations Bulk Exposed to Highly Liquid Frauds Cash Transaction Satisfy Procedures - complied Auditor Accounting & Internal Control Correctly Recorded © ICAI. 2014 11 .

2014 12 .Internal Control System Give Protection Against Losses Fraud Waste Mistakes Ensure Transactions Correctly recorded Enable Take policy Decision Planning Operation Appropriate Time © ICAI.

Steps in Verification of Internal Control Systems An Intro. © ICAI. 2014 13 .

2014 14 .Steps Involved in Verification of Internal Control System No receipts left unaccounted System No Payment without receipt of good/ service Study Financial Powers Examine Authorized person © ICAI.

2014 15 .Steps Involved in Verification of Internal Control System – 2 Confirm Supervision Managerial Accounting Adequate © ICAI.

Steps Involved in Verification of Internal Control System – 3 Mechanical Aids Ascertain Ensure Proper A/c’ ing Prevention of Pilferage © ICAI. 2014 16 .

Steps Involved in Verification of Internal Control System – 4 Ensure Working of Checks Observe Accounting System Counter Checks Are Applied © ICAI. 2014 17 .

5 Confirm Adjusted Reported System Existence Differences of Assets Reconciled © ICAI.Steps involved in verification of internal control system . 2014 18 .

Steps involved in verification of internal control system . 2014 19 .6 • Review Internal Control System • Periodically • To plug in loop holes • Incorporate Changes © ICAI.

2014 20 .Correctness of Book Keeping Records Important Ensures Review • Audit of Cash • System of • Disclose Transaction Accounting • Mistakes • Followed • Manipulations © ICAI.

2014 21 .Observance of Accounting Principles Capital Expenditure Revenue Distinction Capital Receipts Revenue © ICAI.

2014 22 .2 Matching Accounting Principle Include Income Expenses © ICAI.Observance of accounting principles .

3 Outstanding Assets/Liabilities Written off Fictitious Assets Accounting At earliest Principle Include Depreciated Fixed Assets Consistent basis © ICAI. 2014 23 .Observance of Accounting Principles .

Evidence of Transactions Supplier Invoices/ Statement of Entries . 2014 24 .Evidences Variety of Forms Accounts / Minutes / Contracts Two Types of Internal Evidence External Evidence Evidences © ICAI.

2014 25 . Carbon Copies of Cash memos.Internal Evidences Normal Course of Business Counterfoil of receipts. Invoices. etc © ICAI.

2014 26 . lease agreement. confirmation of debtors balance © ICAI.External Evidences Issued by person – with whom business transaction entered into Invoice for purchases. bank statement Certain Evidences – Directly obtained by Auditor Certificate regarding bank balance.

Preferable Not Possible for External Evidence Use Internal Evidence Normal Course of Working of Business Internal Check To prevent subsequent alteration © ICAI. 2014 27 .Dependence on Evidences External Evidence .

Validity of Transactions Audit Establish Payment Validity Recipient © ICAI. 2014 28 .

2014 29 .Validity of Transactions -2 Fees/Salary Legal Partnership Provisions Act Rules & Companies Regulations Act Documentary Evidences Minutes of BOD Agreement © ICAI.

2014 30 .Disclosure in the Final Accounts Objective of Audit Classification Re-classification Compliance with Book of Accounts Income & Expenses Companies Act Financial Statements Assets & Liability True & Fair View Grouping of like nature Description reflect nature of accounts © ICAI.

Casting / Totalling Checking Lead to Important Fraud Over Under Totaling Totaling © ICAI. 2014 31 .

Casting / Totalling 2 Receipt Side Under Casting Cash Book Examples Payment Over Casting Side/Cash Book © ICAI. 2014 32 .

Casting / Totalling 3 Deposit Fictitious Entries When no Examples Deposit is made Cash Sales As Credit Sales © ICAI. 2014 33 .

Summary Vouching General Considerations – Verification – Cash Transactions Internal Control Systems Accounting Principles Evidence of Transactions / Validity of Transactions © ICAI. 2014 34 .

Thank You © ICAI. 2014 35 .