Page 177 - DCOM204_AUDITING_THEORY

Unit 9: Vouching

While examining the vouchers the audit clerk should note the period for which the payment has Notes
been made.

9.2.1 Internal Check as regards Cash Book

Before the auditor starts the vouching of the cash book, he should enquire about the
system of internal check in operation. There are lot chances of misappropriation of cash if
there is no well-organized system of internal check. He should enquire as to the duties of
the cashier, and whether he has access to the ledger and other books of original entry.
The following system of internal check as regard receipt and payment of cash is
suggested:
1. When cash is received, it should be acknowledged by means of a printed receipt
which should have a counterfoil or by a carbon receipt.
2. As soon as cash is received, it should be entered in a rough cash book or diary.

3. Remittance should be opened by the cashier in the presence of a responsible
officer who should not be connected with the cashier’s office.
4. All the receipts of the day should be deposited in the bank at the end of the day or
the next morning.
5. Bank reconciliation statement should be prepared frequently by the cashier and
also by someone else.
6. The cashier should not have any control over the ledgers.

7. Petty cash should be organized under the Imprest system.
8. Casting of cash book should be independently checked.
9. All payments as far as possible, except for petty cash, should be made by cheques.
10. Cashier should not sanction the payments of special nature. Directors should do
so.
!
Caution There are lot chances of misappropriation of cash if there is no well-organized
system of internal check.

9.2.2 Procedure in regard to Vouching the Debit Side of the Cash Book

After satisfying himself that there is a good internal check system regarding the receipts and
payments of cash, the audit clerk should now proceed to vouch the debit side of the cashbook.
Some of the important items which usually appear on the debit side of the cash book and the
duty of an auditor in that connection are given below:

Opening Balance: This should be compared with the balance shown in the duly audited balance
sheet of the previous year.
Cash Sales: There are grater chances of fraud under this head. The salesman may sell goods and
may not an entry in the cash book and thus misappropriate the money. The auditors should
compare the dates on the cash memos and the cash book. If discount has been allowed on sales,
he should see that a uniform policy and rate of discount has been followed. He may also
compare a few items of sale with the stock.
Receipts from Debtors: The auditor should vouch cash received form debtors to whom goods
have been sold on credit in the past. The only evidence available on account of this item is the

LOVELY PROFESSIONAL UNIVERSITY 171