Page 176 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes explanation for their loss should be obtained from the client and it the auditor is
not satisfied with the explanations, he should mention this fact in his report.
12. The audit clerk should not take the help of any members of the staff of the client
for an explanation, while vouching receipts.
Self Assessment

State whether the following statements are true or false:
1. Vouching is an act of comparing entries in the books of accounts with documentary
evidence in support.

2. Vouching does not indicate about that transaction, which is omitted from the books of
account.
3. The vouchers are considers correct only when the proper authority signs on them.

4. The stamps are required according to the valuation of the amount or cash memo.
5. The senior auditor instead of signature or initials he can use stamps for checking the
vouchers can use the rubber stamps.

9.2 Vouching of Cash Transactions

After preparing Audit note book, audit planning, auditing working papers, audit preparations
etc., the next step is to proceed with the examination of accounting entries passed in the books of
account during the period under review. In this step the auditor has to check the entries with its
supporting documents to determine the accuracy and authenticity of the entries passed by
verifying the vouchers, bills and other supporting documents. This process of checking the
evidence of the entries called vouching. It may relate to cash as well as trading transactions.

Auditor is required to certify the financial statements prepared by the accountant as the statement
shows the true and fair view of the results of operations and the state of affairs of the business.
Unless he tries to establish the accuracy and authenticity of all the transactions recorded in the
books of account, auditor will be falling from discharging his duty.
Voucher is a piece of paper or a document that confirms the truth of a happening in the field of
accountancy; it confirms either the payment or receipt of money. The voucher is an evidence of
occurrence of a transaction that is entered in the books of accounts. It is the authority on the basis
of which entries made. Vouching clearly shows the nature of the transaction.
Vouching is extensive examination of documents carried out for the purpose of established the
authenticity of the transactions recorded in the books of accounts. Vouching also involves evaluation
of internal checks and examination of internal controls relating to recording of transactions. Only
on the basis of the conclusions drawn while vouching, auditors determine the nature and extent of
their work subsequent to vouching. Therefore, extreme care should be taken while vouching.
Important facts obtained from vouchers are date of transaction, name of the party, adherence,
nature of the transactions, the amount mentioned in the voucher, and authority.
The main objectives of the audit of cash book:
1. To ensure that all receipts are accounted for

2. To ensure that no fraudulent payments have been made;
3. To know that all receipts and payments have been properly recorded; and
4. To verify the cash in hand and at bank.

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