Vouching

Definition: Vouching is the process of analysing vouchers of the business enterprise. It is a step pursued in auditing, with an aim of checking the accuracy and reliability of the transactions entered in the company’s books of accounts.

In this process, the company’s transactions are thoroughly verified with the documentary evidence and the authority, which forms a basis for recording the transactions in the accounts books.

Further, it also validates that the amount stated in the voucher is accurately entered in the relevant account, which indicates the nature of the respective transaction when it is included in the financial statements.

What is a Voucher?

A voucher is nothing but a written or printed piece of documentary evidence, which authenticate the transactions, i.e. it proves that the entries made in the books of accounts are real and genuine.

Vouchers can be sales invoice, purchase invoice, bank statements, minutes book, cash memo, bills, bank paying slip, purchase requisition slip, receipt, salaries and wage sheet, gate keeper’s note, bank passbook, memorandum and articles of association, delivery challans, stores, records, counterfoil of cheque book, etc.

The points stated hereunder are to be considered at the first place while checking vouchers:

1. It should be duly authorized by the stipulated signatory.
2. Date of the voucher.
3. Name of the party or client mentioned in the voucher.
4. It should be complete.
5. It belongs to the business entity.

Once the vouchers are examined, they must be imprinted with a stamp or signed, to ensure that they are not presented further, as proof of another transaction.

Objectives of Vouching

• To check whether proper documentary evidence is there in support of the entries made in the books of accounts.
• To check whether the transactions are duly authenticated by the person in charge.
• To make sure that all the transactions that have been occurred, are entered in the books of accounts.
• To check whether there are any fake or fraudulent transactions recorded in the books of accounts.
• To ensure that only business related transactions are entered in the books of accounts.
• To check no entries are missing or omitted from the books of accounts.
• To examine the transaction for which money paid or received relates to the business.
• To examine that capital and revenue expenses and receipts of the business are properly classified.
• To examine that the entries are made in the relevant account only with the correct amount.
• To check whether the transaction belongs to the entity.
• To check if there is any alteration made in the voucher, it has been recorded or not.

As vouching examines the truth of the transactions entered in the company’s accounts, it is known as an acid test of the audit.

Importance of Vouching

1. Evidence: One of the main benefits of the vouching is that all the documentary evidence which substantiate transactions are thoroughly examined, which helps in identifying the genuineness of the transaction.
2. Assurance: Vouching is the crux of auditing, wherein the auditor confirms that transactions that actually occurred are properly recorded, in the appropriate account, with exact amount and in the relevant accounting period. Further, it also helps in identifying that there is a proper classification of transactions, along with that proper disclosure of accounting policies has been made.
3. Verification: Once vouching of the transactions recorded is over, verification of assets and liabilities is done. Therefore, vouching acts as a basis for verifying the assets and liabilities.

In a nutshell, in the vouching process, the auditor examines the genuineness, authenticity, completeness, validity, authorization, classification and accuracy of transactions and also checks that the disclosure of accounting policies and principles has been done.