What is Vouching: Definitions, Objects and Importance of Vouching
What is Vouching: Auditing as a whole consists of mainly two functions both of which are closely connected with evidence. The first is gathering evidence and second is evaluation of the evidence so gathered from the point of view of its validity, adequacy and relevance.
In vouching the auditor check the transactions recorded in the books of accounts with their documentary evidence (vouchers). He tests the arithmetical accuracy or the entries made in the books and calculations made in the vouchers and finds out whether transactions are supported by proper evidences.
The auditor satisfies himself as to the correctness, reliability and acceptability of the vouchers and transaction.
Meaning of Vouching
Vouching is the essence of auditing. Vouching is a potential tool to ascertain the accuracy of transaction entered in the book of accounts. The act of establishing the accuracy and authenticity of entries in the books of accounts is called vouching.
Definitions of Vouching
Some important definitions of vouching are given below:
ACCORDING TO LANCASTER “It is often thought that vouching consists of the examination of the vouchers or documentary evidence with the book entries. However this is quite wrong vouching comprises such examination of the ledger entries as will satisfy the auditor, not only that the entry is supported by documentary evidence but it has been properly made upon the books of accounts.”
ACCORDING TO L.R. DICKSEE “Vouching consists in comparing entries in the books of accounts with documentary evidence in support thereof.”
ACCORDING TO TAYLOR AND PERRY “Vouching may be defined as the examination of the evidence offered in substantiation of the entries in the books including in such examination the proof, so far as possible, that no entries have been omitted from the book.”
ACCORDING TO RENOLD A. IRISH “Vouching is a technical term which refers to the inspection of documentary evidence supporting and substantiating a transaction.”
ACCORDING TO R. K. MAUTZ, “The examination of documentary evidence in support of entries is often referred to as vouching.”
Thus we can conclude from the above definitions that vouching is a method of examining the transactions recorded in the books of accounts with the help of documentary evidence in order to ascertain the accuracy of the transaction recorded in the books of accounts.
Importance of Vouching
Vouching is an important aspect of auditing. Auditing without vouching shall be incomplete. Vouching consists in comparing entries in the books of accounts with their documentary evidence in support thereof. Vouching has been said to be the essence or backbone of auditing as it is one of the most patent tools in the hands of auditors.
According to DePaula, “Vouching does not merely mean inspection of receipts with the cash book but include the examination of receipts with the transaction of a business together with documentary and other evidence of sufficient validity to satisfy and auditor that such transaction are in order have been properly authorized and correctly recorded in the books of accounts”.
According to Statement of Auditing Standards, of American Institute of Certified Public Accountants, New York, “Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries and confirmation to afford a reasonable basis for an opinion regarding the financial statements under examination.
The auditor has to apply his tact’s to carry out his work in a proper way. On the face, entries appear to be innocent. Unless the auditor goes behind the books of accounts and traces the source of entries he cannot ascertain the truth. Thus, it is not only mean arithmetical accuracy of the books of accounts which is the concern of the auditor but he has to go beyond it and satisfy himself that the entries are actually correct and relate to the business concerned and the year under audit. The auditor with the help of vouching may find out such entries which are contrary to facts.
This has been decided in the case of Armitage Vs Brewer & Knott (1932), where Hon’ble Justice observed:
“It should be realised, however, that the very nature of vouching renders it a practically indispensable phase of every audit and that where curtailment of the auditor’s duties in this direction is contemplated, the risk that may be incurred should not be overlooked.”
In the words of DePaula, “An auditor is blind-fold who does not base his audit upon thorough and efficient vouching. In most cases clever frauds can only be discovered by vouching so that it is essential that this part of an audit should be conducted with great care and intelligence.”
Having seen the importance of vouching in auditing people has started saying “Vouching is the backbone of auditing”. This statement seems be true and correct. As the human structure is affected with the weakening of the backbone, similarly the structure of auditing is adversely affected in the absence of proper vouching. The more the auditor is careful while vouching, the more he makes his audit work simple, trustworthy and facilitating.
With a broken backbone a human being can neither stand nor walk properly. Similarly, with faulty vouching the auditor cannot examine the truth and propriety of the transactions recorded in the books of accounts.
According to Bose, “Truly it is said to be the essence of auditing since it is through vouching that an auditor can satisfy himself about authenticity and completeness of the transactions recorded in the books.”
The backbone of human structure is hard. Likewise, the work of vouching is very tedious and hard.
In real sense, vouching is not only the backbone or essence of auditing but also is its soul.
It hasten rightly stated that “Vouching is the very essence of auditing and whole success of an audit depends upon the intelligence and thoroughness with which this part of the work is done.”
Objects of Vouching
The chief objects of vouching are as follows:
- Collection of evidence:
Vouching involves the collection of voucher and related evidence.
- Evaluation of evidence:
Vouching involve evaluating the collected evidence and voucher.
- No omission of record:
Vouching involve to find out that there is no omission of any records.
- Examination of record:
Vouching involve the examination of books of accounts with the help of voucher.
- Correctness of transaction:
Vouching involve to ascertain the correctness of the transaction.
- Proper transaction:
In vouching the auditor find out whether entries have been properly made in the book of accounts.
- Payments are made:
In vouching auditor has to ascertain that payments have been actually paid away in respect of business transactions.
- Balance of cash:
In vouching auditor has to vouch the balance of cash in hand and cash at banks.
- Fraudulent payments:
Vouching involves that no fraudulent payments have been made.
- Final conclusion:
Vouching provide the basis for final conclusion to be drawn by the auditor.
- Related to the business:
Vouching also refers to check the entries which are recorded in the books of accounts are related to the business concern or not. Unless vouching is done with perfection, skill and care the auditor cannot say that the profit and loss account and the balance sheet represent the true and fair view of the state of affairs of a concern for a particular period.
