Checking of journel vouchers.
This query is : Resolved
29 December 2012
Sir I am an audit assistant engaged in Internal Audit, while checking J.V. it was found that,
All bills and approval made in factory in Bhopal, after approval same is sent to indore office to account for.
So if any transaction occour on 18.04.12, invoice made on the same date, but entry for the same is passed on 03.08.12.(i.e. the date of receipt of approved invoice) Auditee's reply for the same he pass entry when he receive the invoice, and difference in dates is due fulfilmet of procedure(i.e. approval , forwarding of invoice to accounts office). This difference is found in majority of transaction
and the entry cannot be passed on back date in order to maintain the voucher nomber series.
Kindly help me the, Whether the procedure adopted by managment is correct, when the entry should be passed , and if is not on date of invoice whold should be the tollerable period?
All bills and approval made in factory in Bhopal, after approval same is sent to indore office to account for.
So if any transaction occour on 18.04.12, invoice made on the same date, but entry for the same is passed on 03.08.12.(i.e. the date of receipt of approved invoice) Auditee's reply for the same he pass entry when he receive the invoice, and difference in dates is due fulfilmet of procedure(i.e. approval , forwarding of invoice to accounts office). This difference is found in majority of transaction
and the entry cannot be passed on back date in order to maintain the voucher nomber series.
Kindly help me the, Whether the procedure adopted by managment is correct, when the entry should be passed , and if is not on date of invoice whold should be the tollerable period?
19 July 2024
In auditing journal vouchers and assessing the timing of entries, it's crucial to ensure that transactions are recorded accurately and in compliance with accounting standards and internal policies. Here’s how you can evaluate the situation based on the information provided:
### Evaluation of the Procedure:
1. **Nature of the Transactions:**
- Transactions originate in Bhopal, where bills are approved, and then sent to the Indore office for accounting.
- There is a delay between the date of the transaction (e.g., invoice date) and the date the entry is passed (when the approved invoice is received).
2. **Reason for Delay:**
- The delay is attributed to the procedural steps involving approval and the physical transfer of invoices to the accounts office in Indore.
3. **Voucher Numbering and Backdating:**
- The auditee states that entries cannot be backdated due to maintaining the voucher number series.
### Assessment and Recommendations:
Based on typical auditing principles and practices, here are considerations for evaluating the procedure:
- **Accrual Basis of Accounting:** Generally accepted accounting principles (GAAP) require transactions to be recorded in the period they occur, not when invoices are physically received or processed. This principle ensures that financial statements reflect the true economic impact of transactions.
- **Materiality and Timeliness:** Assess the materiality of the timing difference between the date of the transaction (invoice date) and the date of entry. While delays due to administrative procedures are understandable, there should be a reasonable timeframe within which entries are recorded to ensure financial statements are timely and accurate.
- **Internal Control Considerations:** Evaluate the internal controls surrounding the approval and accounting processes. Ensure that delays do not impact the integrity of financial reporting or expose the organization to undue risk (e.g., misstatements, inaccuracies).
- **Policy Review:** Review the company's internal policies regarding the timing of recording transactions. If there is no explicit policy, recommend establishing a guideline for the maximum allowable delay between the transaction date and the entry date, based on industry practices or regulatory requirements.
### Recommendations:
- **Establish a Reasonable Cut-off Date:** Recommend that entries should be recorded within a reasonable period after the transaction date, considering the operational procedures involved. This cut-off date should balance the need for timely recording with practical operational constraints.
- **Documentation and Explanation:** Require clear documentation and justification for any delays beyond the recommended cut-off date. This ensures transparency and accountability in the recording process.
- **Training and Awareness:** Provide training to relevant staff on the importance of timely and accurate recording of transactions to comply with accounting standards and internal policies.
### Conclusion:
While procedural delays are understandable, it is essential to ensure that entries are recorded in a timely manner to maintain the integrity and reliability of financial reporting. Recommend establishing a reasonable cut-off period for recording transactions and ensuring compliance through effective internal controls and monitoring. This approach will help mitigate risks associated with delayed entries while maintaining the integrity of the voucher numbering system.
### Evaluation of the Procedure:
1. **Nature of the Transactions:**
- Transactions originate in Bhopal, where bills are approved, and then sent to the Indore office for accounting.
- There is a delay between the date of the transaction (e.g., invoice date) and the date the entry is passed (when the approved invoice is received).
2. **Reason for Delay:**
- The delay is attributed to the procedural steps involving approval and the physical transfer of invoices to the accounts office in Indore.
3. **Voucher Numbering and Backdating:**
- The auditee states that entries cannot be backdated due to maintaining the voucher number series.
### Assessment and Recommendations:
Based on typical auditing principles and practices, here are considerations for evaluating the procedure:
- **Accrual Basis of Accounting:** Generally accepted accounting principles (GAAP) require transactions to be recorded in the period they occur, not when invoices are physically received or processed. This principle ensures that financial statements reflect the true economic impact of transactions.
- **Materiality and Timeliness:** Assess the materiality of the timing difference between the date of the transaction (invoice date) and the date of entry. While delays due to administrative procedures are understandable, there should be a reasonable timeframe within which entries are recorded to ensure financial statements are timely and accurate.
- **Internal Control Considerations:** Evaluate the internal controls surrounding the approval and accounting processes. Ensure that delays do not impact the integrity of financial reporting or expose the organization to undue risk (e.g., misstatements, inaccuracies).
- **Policy Review:** Review the company's internal policies regarding the timing of recording transactions. If there is no explicit policy, recommend establishing a guideline for the maximum allowable delay between the transaction date and the entry date, based on industry practices or regulatory requirements.
### Recommendations:
- **Establish a Reasonable Cut-off Date:** Recommend that entries should be recorded within a reasonable period after the transaction date, considering the operational procedures involved. This cut-off date should balance the need for timely recording with practical operational constraints.
- **Documentation and Explanation:** Require clear documentation and justification for any delays beyond the recommended cut-off date. This ensures transparency and accountability in the recording process.
- **Training and Awareness:** Provide training to relevant staff on the importance of timely and accurate recording of transactions to comply with accounting standards and internal policies.
### Conclusion:
While procedural delays are understandable, it is essential to ensure that entries are recorded in a timely manner to maintain the integrity and reliability of financial reporting. Recommend establishing a reasonable cut-off period for recording transactions and ensuring compliance through effective internal controls and monitoring. This approach will help mitigate risks associated with delayed entries while maintaining the integrity of the voucher numbering system.
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