If rent is collected through the collecting agents, it shall be vouched with statement or summaries prepared by the collecting agents. Vouching Proves the accuracy of book entries but certification on balance sheet can be made only after verification. and also other payment made in cash. 2. Cash Sales 3. Define the term internal control and describe the ... Write a note on the following terms 1. For example, an auditor is engaged in vouching when examining a shipping document to see if it supports the amount of a sale recorded in the sales journal . Vouching means “to vouch” i.e. Definition: Vouching, widely recognized as “the backbone of auditing,” is a component of an audit seeking to authenticate the transactions recorded in a firm’s book of accounts. Petty Cash Book 2. The procedure … He should also check the claims register. The auditor has to keep in mind that the installment includes interest also. Petty Cash Book: (i) Examining the adequacy of internal check and internal control systems in force; … Vouching of Cash Transactions | Points to be considered, General Points to be Considered while Vouching Cash Transactions, 2. Where the company has a discount policy, if more discount is allowed in a transaction, a responsible officer must approve it. 1. In case of long outstanding rent, the explanation should be sought for to find out the genuineness of the outstanding. The auditor can go backward also using the help of tracing. The cashier receives the payment and retains one copy with him and the other two copies of the cash memos are returned to the customer with “Cash Received” or “Cash Paid” seal. VAT input is also our current Asset or Negative Current Liability because We paid this to our creditor or supplier (for paying govt.) Substantial Procedures Vouching of Cash Transaction ... 1.when cash is received it should be acknowledged through printed receipt which should have counterfoil or carbon copy. It involves misappropriation of cash received from customers. While vouching dividends received for the shares held by the client, the auditor should check dividend warrant, counterfoil and covering letter received along with the cheques. Vouchers to be Vouched — Duplicate Cash Memo, Salesman’s Abstracts, and Cashier Summaries. | EduRev B Com Question is disucussed on EduRev Study Group by 148 B Com Students. Under this method when cash is received from a customer, say “A” the cashier makes no entry in the cash book, and he misappropriates this money. Sale of Investments 7. A list of audit procedures includes vouching, tracing, observation, inspection of tangible assets, confirmation, recalculation and use of analytical procedures. Such bills have been dishonored or returned. However, this is not a reliable voucher as frauds are usually committed in the following ways: 1. The internal control needs to be revised periodically and suitable modification is done to make it more effective. Opening Balance: Examine the balance shown in the audited balance sheet of the previous year. The amount deducted for discount on such bills should be separately debited in the discount account. There are greater chances of fraud under this head and so much care should be taken. Vouching is the process of reviewing documentary evidence and ensure that it properly supports entries made in the books of accounting. Examine cash book Cash book Examine Broker’s Note Broker’s Note Authorization of sales AoA Compliance with AS-13 Wages & Salaries Examine cash book Cash book Examine the pay-roll summary Pay roll summary, Job card, Relevant ledgers Examine employee data (employee name, wage rate, attendance summary) Employee register. Definition: Vouching, widely recognized as “the backbone of auditing,” is a component of an audit seeking to authenticate the transactions recorded in a firm’s book of accounts. Later on when cash is received from “B” the amount is recorded on the debit side of the cash book by crediting the account of “A”. In simple and easier words, it is a precise investigation of the presented documents of the firm by an auditor to check the correctness and accuracy of such documents. Auditors test assertions made by management about the validity of their financial statements by using a series of audit procedure steps. Q.5 How do we differentiate correct valuation from correct disclosure? Jan 15,2021 - Write the procedure of vouching a cash book? While vouching, the auditor should verify and satisfy himself that vouchers in the form of receipts, bills, invoices, cash memos etc., correspond with the entries in the cash book. Tracing, vouching, and inspecting involve the use of documentary evidence. The system of accounting should be tested for its accuracy of recording cash transactions. vouching-summary.pdf - Free download as PDF File (.pdf), Text File (.txt) or read online for free. The gatekeeper collects and retains the fourth copy with him who hands over the goods to the customers. The cash balance on any day can be known from cash book. This is possible when they are not kept in safe custody. Vouching is the essence of the Auditing. Interest received on the securities can be vouched from covering letters received along with the cheques/D.Ds and Schedule of securities. 3. 2. The TOTAL amount they have spent is £1800, of which £1500 is the NET value of the purchase and £300 can be reclaimed from HMRC as they are a VAT registered company. Inspecting could involve the use of physical evidence as do the procedures of counting Vouchers to be Vouched — Agreement, and Counterfoils. Where the dividend warrant has been received and is not yet collected by the bank it should be shown as cheque yet to be collected. 3. Meaning: It is the process of checking the evidence between accounting system, book keeping (transaction) & supporting documents (invoices, bills, receipts) to detect or to find out errors & frauds, to check accuracy and reliability of records. To know that all receipts are accounted for. Sale of Scraps 9. If they have been sold through bank, bank advice should be examined. He should examine the agreements for receiving commission as to the rate of commission. 3. If sold through auction, the auditor should examine the auctioneer’s account. “Lapping may be defined as concealment of a shortage by delaying the recording of cash receipts”. In case the dividend is collected through bank, amount should be verified with the bank statement. He can apply test checking to determine accuracy. 6-7. cash book. 4. 2. Vouching of Purchase Book. In case of routine checking, the entries that are recorded in the books of account reflect only the information that the book keeper wishes to reveal, the entries can even be untrue without any vouchers or vouching. Ensuring Proper Control of Receipts Book, Vouching of Loans Received & Bills Receivable | Auditor Role, Vouching of Receipt Side or Debit Side of Cash Book | Vouchers to be vouched, Vouching Sales Ledger or Debtor’s Ledger | Guidelines to Auditors, Vouching of Bought Ledger or Creditor’s Ledger | Guidelines to Auditor, Vouching Sale of Fixed Asset, Royalties Received | Auditor Role, Vouching Payment of Income Tax & Sales Tax | Role of Auditor, Weaknesses of Trade Union Movement in India and Suggestion to Strengthen, Audit Planning & Developing an Active Audit Plan – Considerations, Advantages, Good and evil effects of Inflation on Economy, Vouching of Cash Receipts | General Guidelines to Auditors, Audit of Clubs, Hotels & Cinemas in India | Guidelines to Auditors, Depreciation – Meaning, Characteristics, Causes, Objectives, Factors Affecting Depreciation Calculation, Inequality of Income – Causes, Evils or Consequences, Accountlearning | Contents for Management Studies |. Then, the auditor should verify the daily deposits of cash received in the bank. He should also see that the accurate amount has been received and entered in the book. Vouchers to be Vouched — Counterfoils, Dividend Warrants, and Pass Book. How to Process Cash Receipts The process of receiving cash is highly regimented, because the task of processing checks is loaded with controls. It is an important financial book for a business concern. Cash book is one of the most important books of accounts. Income Tax Refund 10. Auditor should take the following precautions while vouching cash receipts or cash payments. 2.when cash is received it should entered in rough cash book or diary ASAP. All errors that have been committed in the Cash Book will have to be rectified by passing adjusting entries in the Cash Book. 14. In such a case, he may check a few items at random and if he finds that they are all in order and free from irregularities, he has reason to assume that the remaining transactions will be correct. He should ascertain the amount of debt and the rate of dividend from it. All particulars regarding bills receivable can be obtained from Bills Receivable Book. Vouching 2.1 Vouching includes the following a) receipts and payments of Cash book and Bank book including Petty Cash book b) sales c) purchases d) credit notes e) debit notes f) register of postage g) register of hundi paper h) any other book/register of prime entries, salary He should note that the whole amount of an installment is not credited to sales account and it has been properly apportioned between sales and interest. Discuss vouching with respect to cash book payment side. 2. He should be directed to prepare four copies of the memo of the goods sold, of which three copies are to be handed over to customer; and he has to keep one copy with him. It … He should compare it with Bill Receivable Book, cash book, and pass book. This is how E&J Consultancy’s cash payment is entered into the cash-book. If there are certain entries in cash book for which receipts have been issued, they should be carefully checked. The receipt side or the debit side of the cash book contains items such as opening balance, cash sales, receipts from debtors, receipts from bills discounted and bills matured, income from investments, sale of investments, sale of fixed assets, loan received, and miscellaneous receipts, etc.