Unit – 2
Vouching and Audit Note Book
Q1) Define Vouching
A1)
- It is necessary to establish authenticity of the financial transactions which are entered in the books of accounts. It can be done by examining various vouchers which are prepared in support of the transactions. This practice of examining vouchers is referred as Vouching.
Q2) What are the importance of Vouching?
A2)
An auditor has to keep certain things in mind in any vouching. These are:
- That the date of the voucher falls within the accounting period.
- That the voucher is duly authorized.
Q3) Explain the vouching of different books of original entry?
A3)
Vouching of books of original entry can be divided into two parts –
Vouching of Journal proper and Vouching of Subsidiary books.
Vouching of Journal proper:
Journal proper is meant for recording all those transactions which cannotbe recorded in the other subsidiary books viz purchase book, sales book,purchase return book, sales return book, cash book, Bills Receivable book and Bills Payable book.
An auditor should vouch the journal proper on the following lines:
1) He should verify that every entry in the journal proper is supported by avoucher or evidence.
2) When the evidences are not available for some entries in the journalproper, the auditor should check those entries from the evidence of parties.
3) He should see that every entry in the journal proper is explained bynarration.
Vouching of Subsidiary books:
1) Vouching of Purchase Book:
The Auditor needs to verify the following in the Purchase Book and the Vouchers-
a) Date of Invoice
b) Name of Supplier
c) Amount in Voucher vis a vis Bill issued by the supplier
d) Inspection of Quality Report and amount of rejected goods to be verified
Besides checking the Purchase Book and Vouchers, the Auditor needs to verify the following:
- Quotations,
- Authorization of purchase,
- Statement of accounts' received from the suppliers.
2) Vouching of Sales Book:
The Auditor needs to verify the following in the Sales Book and the Bills-
a) Name of debtor in an invoice against the name in the subsidiary book
b) The date of invoice should be within the accounting period
c) The authority for granting discount
d) The invoice should be authorized by a responsible officer
Besides checking the Purchase Book and Vouchers, the Auditor needs to verify the following:
- Procedure of dispatch of goods,
- Sales contracts, if any,
- Exchange conversion rates, Clearing and Forwarding Bills, Banker’s advice, etc. in case of Export Sales.
3) Vouching of Purchase Return Book:
The Auditor needs to check the system of recording goods returned by the company.
After checking and evaluating the internal control system, the Auditor should vouch the following:
a) Credit Notes received from the suppliers with the returns outward book and the relevant correspondence and
b) The returns outward book with goods outward book.
4) Vouching of Sales Return Book:
An Auditor should inquire into the system of recording goods returned by customers.and credit notes for the same.
After checking and evaluating the internal control system, the Auditor should vouch the following:
a) The credit has been authorized by a competent authority and
b) No credits have been suppressed or inflated
Q4) Give a short note on Audit Note Book.
A4)
It is necessary to establish authenticity of the financial transactions which are entered in the books of accounts. It can be done by examining various vouchers which are prepared in support of the transactions. This practice of examining vouchers is referred as Vouching.
An auditor has to keep certain things in mind in any vouching. These are:
- That the date of the voucher falls within the accounting period.
- That the voucher is duly authorized.
Vouching of Subsidiary Books:
- Vouching of Purchase Book:
The Auditor needs to verify the following in the Purchase Book and the Vouchers-
e) Date of Invoice
f) Name of Supplier
g) Amount in Voucher vis a vis Bill issued by the supplier
h) Inspection of Quality Report and amount of rejected goods to be verified
Besides checking the Purchase Book and Vouchers, the Auditor needs to verify the following:
- Quotations,
- Authorization of purchase,
- Statement of accounts' received from the suppliers.
2. Vouching of Sales Book:
The Auditor needs to verify the following in the Sales Book and the Bills-
e) Name of debtor in an invoice against the name in the subsidiary book
f) The date of invoice should be within the accounting period
g) The authority for granting discount
h) The invoice should be authorized by a responsible officer
Besides checking the Purchase Book and Vouchers, the Auditor needs to verify the following:
- Procedure of dispatch of goods,
- Sales contracts, if any,
- Exchange conversion rates, Clearing and Forwarding Bills, Banker’s advice, etc. in case of Export Sales.
3. Vouching of Purchase Return Book:
The Auditor needs to check the system of recording goods returned by the company.
After checking and evaluating the internal control system, the Auditor should vouch the following:
c) Credit Notes received from the suppliers with the returns outward book and the relevant correspondence and
d) The returns outward book with goods outward book.
4. Vouching of Sales Return Book:
An Auditor should inquire into the system of recording goods returned by customers.andcredit notes for the same.
After checking and evaluating the internal control system, the Auditor should vouch the following:
c) The credit has been authorized by a competent authority and
d) No credits have been suppressed or inflated
Q5) What do you mean by Audit Programme?
A5)
- An audit programme is a detailed plan of the auditing work to be performed. The auditor plans the whole procedure of audit from beginning till the finalization of audit report.
- It specifies the procedures to be followed in the conduct of audit more efficiently and competently. In short, it is a tool for planning, directing and controlling the audit work.
Q6) Explain the main contents of Audit Programme?
A6)
Main contents of Audit Programme:
1) Name of the client.
2) Nature of operations and business of client.
3) Date of commencement of audit work.
4) Duration of audit work.
5) Review the report of the previous auditor.
6) Review of system of internal check.
7) Accounting system followed in client organization.
8) Examine the various ledger accounts and subsidiary books.
9) Examine the statutory books and registers, profit and loss account, and balance sheet.
Q7) What are the importance of Audit Programme?
A7)
1) To facilitate coordination among various parts of audit work.
2) To fix responsibility and accountability of each audit assistant.
3) To serve as a guide for planning the audit work in future.
4) To ensure uniformity in the performance of audit work and to avoid duplication and repetition of work.
5) To serve as evidence of methods or procedures undertaken, persons involved in completion of audit work etc.
