I have come across many articles assistant and on asking their experience of audit one thing which I found common is that they all hate vouching during audit. For them, Vouching is a boring and monotonous work. But after reading my article, I am sure you will start loving vouching. I am sure for many of you; vouching is nothing but checking of two amounts. Have you ever thought the motive of checking vouchers? Not yet! Than whenever you go to check vouchers next time, stop for a while and think why you are doing vouching. If you get following answers than you are on the right track:
a. How can you be sure that every expenses entered in accounting system are real and no chances are there for any types of fraud in those payments? Of course by checking vouchers and above all by checking supportings available with them. This is why, vouching is required. The main purpose of vouching is to ensure that proper evidence is available for every entry.
b. The purpose of vouching is to note that there is proper authority behind every transaction. In the absence of any signature of manager the transaction is not acceptable at all. Though the signing authority may be different for different organisations yet there must be someone without whom vouchers can't be paid. The signatures, initials and rubber stamp are evidence that document has been authorized and checked.
c. Another objective of vouching is to check that date of the vouchers relate to accounting period for which they are supposed to be. The adjustments in books are made on the basis of current year record of transactions
d. Do you know that not maintaining proper vouchers and supporting is equal to giving opportunity of fraud? It is only vouchers and supportings by which correctness of amounts can be checked as have been recorded in the entry. The vouching is useful to record correct amounts in the books of accounts
e. I am sure you all have read AS-1.What is it for? It says that accounting is based upon three fundamental objectives, Accrual is one of them. What if your client has purchased a machine which has useful life of more than one year and have debited to Repairs and maintenance ledger. Can you check it by just going through accounting software? We all know the answer. We can never check these types of inaccuracy by just peeping into software. This is where we need to examine supportings to analyse the type of transactions. The purpose of vouching is to examine transaction into capital and revenue. The expense relating to one year is treated as revenue otherwise it is called capital.
e. As per Income tax act, 1961, Expenses which are of personal nature can't be allowed as business expenditure. The purpose of vouching is to check that all the purchases booked are for the purpose of business. The private purchase cannot be recorded as business purpose.
f. The purpose of total vouching is to check that there are no errors and omissions in the books of accounts. What if any cash sale made could not be entered. Is there any way to locate that? Of course not without checking sales bill. The errors are the result of carelessness or over work. But audit staff is not over loaded so they can locate error.
g. The purpose of vouching is to examine that no fraudulent payments are made. The fraud can be committed due to matching of minds of employees and customer. The auditor can vouch the entries top disclosed such frauds. It is an obligation of the auditor to specify that no fraud has been committed especially if the Company you are auditing is under CARO.
h. Last but not the least, only at the time of vouching we can ascertain whether the requirement of any law applicable on client's business is being adhered or not. Like if client is registered under excise act, he needs to issue specific types of invoice as given in the act. If there is TDS on any payment we may see the nature of expense by supporting of that expense. At the same time, we may verify whether correct rate of VAT and Service tax has been applied. I hope you have got my point. If you want to become a successful chartered accountant, never think that vouching is a boring work.
Think out of the box. Points given above are only inclusive and not exhaustive. I am sure you will add some more points in this list whenever you go for audit next time.
Best of Luck!!!
CAclubindia
