MBA (Banking & Finance)

Auditing

Introduction of the topic

Vouching:-
According to L. R. Dicksee

“Vouching consists of comparison of entries in the books of accounts

with documentary evidence in support thereof.”

Ronald A. Irish

“Vouching refers to the inspection by auditor of documentary

evidence supporting and substantiating a transaction.”

Auditors use the word "vouching" to describe a type of evidence-

gathering activity auditors apply in the substantive testing stage.
Vouching is the process of the auditor matching documentary evidence (of
an account balance or a transaction) with the details recorded in
accounting records and provides evidence as to the completeness, validity
or accuracy of an account balance, or underlying class of transaction.

When an auditor requires evidence of the validity of an account

balance or class of transaction, the auditor gathers evidence that details
of the account balance, transaction or economic event recorded in the
accounting records is supported by documentary evidence. i.e. the auditor
vouches from the accounting records to the documentary evidence (or a
"top down" approach). For example, the auditor obtains evidence relating
to the validity of purchases recorded in a client's inventory records by
vouching from details recorded in the inventory records (e.g. the
supplier's name, date purchased, quantity purchased, and the amount of
the transaction) to details on suppliers' invoices.

When an auditor requires evidence of completeness, the auditor

gathers evidence that the account balance, transaction or underlying
economic event referred to in the documentary evidence has been
included in the accounting records. i.e. the auditor is said to have vouched
from the documentary evidence to the accounting records (or a "bottom
up" approach). (This "bottom up" approach is sometimes referred to as
tracing rather than vouching.) For example, the auditor obtains evidence
relating to the completeness of a client's inventory records by tracing
details on the suppliers' invoices (e.g. the supplier's name, date
purchased, quantity purchased, and the amount of the transaction) to the
details recorded in the inventory records.

When the auditor requires evidence of accuracy, the auditor

vouches from the accounting records to the documentary evidence,
although with accuracy, the direction of the vouching is not as critical. For
example, the auditor obtains evidence relating to the accuracy of a

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Auditing

client's inventory records either by vouching from details recorded in the

inventory records (e.g. date of purchase, unit cost) to details on the
suppliers' invoices or by tracing details on the suppliers' invoices (e.g.
date of purchase, unit cost) to the details recorded in the inventory
records.

Documentary evidence has a variety of sources. Documentary

evidence may be obtained independently of the entity, such as evidence
of the market value of investments, or directly from the entity, such as
evidence of the unit cost of inventory. Where it is obtained directly from
the entity, the documentary evidence may be either externally sourced,
as with a supplier's invoice, or internally sourced, as with standard cost
calculations. Thus, the reliability of evidence gathered through
vouching is a function of; inter alia, the source of the evidence.

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Auditing

Important Sub Topics

Techniques of Vouching:-
At the time of vouching the auditor must keep in mind the following
points:

1. Dates and Period

The dates appearing on different papers attached with the vouchers

should support and correspond with the date as recorded on the
transactions.

2. Correct Allocation

Correctness in allocation of certain amounts can be achieved by

thorough examination and scrutiny of documentary evidence attached
with the main vouchers.

3. Arrangement of Vouchers

The auditor must very carefully check the vouchers in the company
under audit are arranged in the same order as the entries are made in the
books of accounts.

4. Proper Authorization

All the vouchers must be properly authorized by the competent and

responsible authority of the company. The signature of the authorized
officers must appear on the voucher and related documents.

5. Agreement of Accounts

This technique states the fact that the amount stated on the
vouchers must be written in both words and figures.

6. Checking of Accounting Heads

This technique of vouching can be materialized by extensive and

detailed checking of the documentary evidence attached with the main
voucher.

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Auditing

7. Arithmetical Accuracy

Correct costing of the vouchers is to be ensured by the auditor.

8. Revenue Stamp

The vouchers established in the company must bear a revenue

stamp of proper value according to the requirements of the voucher.

9. Alteration and Duplication

Alteration or any kind of duplication must be very carefully checked

in the vouchers. .The auditor in this context must thoroughly examine that
all vouchers are approved by an authorized and responsible staff member
of the company.

10. Entry in Business Books

The auditor once completely satisfied in respect, of the contents of

the
voucher and in respect of the above steps, the auditor then reconciles the
vouchers with the transactions recorded in the books of the company
under audit.

11. Stamping

Being totally satisfied in respect of the reconciliation procedure, the

auditor will put a tick (P) mark against the transactions and
simultaneously affix a stamp on the relevant vouchers.

12. Observations

Comprehensive and complete notes should be taken in context of

such items which require further clarification or evidence such as
partnership deeds, lease agreements, memorandum and articles of
association, minute book and various contracts etc.

Scope of application of instructions on the very subject is primarily

confined to the Federal Government, its attached departments and
subordinate offices. However, it also extends to such public sector
corporations, autonomous and semi autonomous institutions under the
Federal Govt., which are established with public funds. Basic rules apply
to all concerned. However, provisions have also been made for some
exceptions in case of field/operational departments and certain
functionaries who genuinely require such facilities. In such cases, a high
powered committee of the Cabinet Division and the Finance Division

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Auditing

accords approval after proper examination and scrutiny as per TOR of

such committee

When vouching/examining a transaction, the essential points need to be

ensured:

 The date of the voucher falls within the accounting period;

 Voucher/transactions therein are duly and properly authorized by

the relevant signatory;

 The transactions being examined belongs to the entity and took

place during the relevant period;

 The transaction is recorded in the proper account and revenue or

expenses is properly allocated to the accounting period;

 All transaction which have actually occurred have been recorded

 The posting from the voucher of the amount needs to be correctly

taken in the final accounts, disclosed in accordance with recognized
accounting policies and procedures.

 The voucher that is being examined need to be properly supported

with all and relevant documents

Vouching is the process by which an auditor of the company checks

for evidence of the transactions that were made in the company during a
financial year. The auditor has to submit evidence of his work that it is
complete and no information has been left out. If any information has
been left, the company can suffer huge problems and losses. It is the duty

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Auditing

of auditor to gather evidence material.

For example, if the company buys raw material, the auditor has to
see an evidence of the purchase by collecting the receipt of the purchase
so that he can continue making a balance sheet or a list of assets. The
information that the auditor collects has to be accurate and precise.

All the information can be obtained by viewing the company's

dealing papers in a particular year. It is the duty of the company to
maintain such papers.

Review of Theoretical & Practical

situations
Vouching for Telecommunications

Vouching for telecom expenses focus on telecommunications bill cost

reduction resulting in an average savings of 35-40% without carrier
changes on:

• Local telephone bills

• Long Distance Invoices
• Frame Relay invoices
• Managed data service invoices
• Wireless invoices
• Internet (IP) and VOIP bills

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Auditing

• Invoice and Bill Dispute Resolution

• Tariff Investigation
• Telecom solutions with emphasis on telecom recovery strategies
through credits and refunds
• Tariff Investigations on billing errors, and overcharges with highest
recoveries and refunds.

Reasons to Conduct a Telephone Bill Audit

• Reduce your phone expenses fast (average 36%)

• Obtain refunds your company is due
• 90% of today's telecom bills contain errors
• Audit team Software is included with each audit at no extra cost

A telephone bill audit is different for every client so we provide a free

consultation to discuss your needs and wishes. Here is a preface to our
phone bill auditing and telecommunications services.

Produce savings:

Investigate your telecommunications bills and bring you bill analysis and
expert solutions for cost reductions.

• Telephone and telecom solution require no carrier changes.

• Audit team telecom software is included at no extra cost with each
audit.
• Produce invisible phone and telecom audits - the only visible part is
the telecom savings
• Place telecom orders on your behalf with your approval
• Provide proof of savings with our audits so you can see the actual
savings (before and after bills)
• Security and protection are built into our telecom audits

Telephone Bill Tariff

Without a financial analysis of your telecom invoices your company can be

sure mistakes and overcharges exist. Take the first step toward reducing
your telephone and telecom expense with a complimentary consultation
at no charge. Next we can determine how much money you have paid in

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Auditing

error and how quickly we can recover your losses and obtain the refunds
you are due. Our clients enjoy quick budget reductions and telephone bill
tariff clean up. This reduces your telecom budget and helps you manage
and maintain cleaner telecom records with the use of our telecom
software given with each audit.

Telecommunications Consulting Services

Audit team has a staff of experts trained in telecommunications tariff

to eliminate the guesswork(Each senior staff member has over a
decade of experience in telecom auditing, some with over 30 years
experience)

• Audit team performs a complete telecom analysis of your invoices

• You receive detailed telecommunications solutions including our
telecom software.
• Dispute Resolution Services
• Management is easier with our telecom software for maintenance
and recordkeeping
• Audit team guarantees no disruption in your business
• Audit team ensures services billed are those requested
• Audit team proves monthly savings and refunds before invoicing

DO YOU CONTROL YOUR TELECOM EXPENSE?

• Detailed list of all your locations

• Detailed list of all phone lines and circuits
• Detailed list of every feature applied to each line and circuits
• Detailed list of each function of all circuits and lines
• Usage for each circuit and line (traffic report)
• Detailed telecom analysis conducted on fees for lines, circuits,
usage, and features
• Telecom contracts reviewed and analyzed with data above
• Analysis of tariff performed on all telecom above
• Detailed records of all orders placed within your telecom
department

Merits & de- merits with respect to

topic
Merits of Vouching:-

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Auditing

1. Vouching is necessary for every registered organization so that the

record should be kept with the documentary evidence.

2. Vouching is considered important because it prevents from frauds

that could have been done by any one from with in the organization.
Vouching is sometimes referred to as verification of the accounting
records.

3. Vouching enable the auditor to know whether the transactions are

genuine and valid to enable the auditor to report on the financial
statements.

4. Normally, extensive vouching exercise is done during the depth

test/cradle-to grave test.

5. Vouching enable the auditor to know whether the transactions are

genuine and valid to enable the auditor to report on the financial
statements.

De- merits of Vouching:-

1. Possibility of tampering with accounts by the client's staff. There is a
possibility of deliberate alteration in figures after an auditor has checked
them. So fraud and error cannot be prevented without further rechecking
of records.

2. More expensive. Continuous audit is comparatively more expensive

as the auditor makes several visits and performs detailed work involving
more time. Particularly, it is not viable for small enterprises.

3. Causes inconvenience. The frequent visits by an auditor and regular

checking of books so account may dislocate his clients work and cause
inconvenience to him.

4. Chance of negligence on part of auditor. Due to frequent visits of

auditor, client’s staff and auditor may develop a social relationship. This
may cause auditor becoming negligent in performing his duty.

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Auditing

5. By routine checking we traditionally think of extensive checking and

vouching of all entries.

Recommendation
• A telecom consultant should reduce your telecom expense without
carrier changes
• Research the telecom consultant by contacting references
• Make sure you are in control of the audit and give permission for any
changes
• A good telecom auditor will want to place the approved orders for
you, to ensure your bills reflect their findings.
• Demand proof of savings in the form of before and after bills, before
paying for any telecom services.

Conclusion

Whether you are an internal or external auditor, vouching and verification

is must for substantive audit procedures. By performing vouching and
verification, the auditor is able to ensure the adequacy of the internal
controls and accounting systems and finally accuracy, existence,
completeness etc of the end balances in the financial statements hence
able to form an opinion whether the financial statement reflects a true
and fair figure.

• Reducing and restructuring some of our rates.

• Creating and distributing reports of services to which departments are
subscribing, but which may be underutilized, and which departments
may wish to consider discontinuing.
• Offering and exploring additional services which may help departments
maintain their levels of customer service to callers to their department.

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Auditing

• Helping departments understand how existing service offerings can

help them be more effective and reduce expenses.

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