This e-Lecture was Recorded on:
September 29, 2014
Intermediate (IPC) Course
Paper 6 Auditing and Assurance
Chapter 5 : Vouching Part 1/6
CA. N Raja Natarajan
© The Institute of Chartered Accountants of India
Disclaimer
• This lecture has been delivered by faculty members to supplement the Study
Material, Practice Manual and other content
1
• The views expressed in this lecture are of the Faculty Member.
2
• The content of this video lecture has not been specifically discussed by the
Council of the Institute or any of its Committees and the views expressed herein
may not be taken to necessarily represent the views of the Council or any of its
3 committees
© ICAI, 2014 2
This e-Lecture was Recorded on:
Important Note September 29, 2014
The e-Lectures, PPT, Podcasts and
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amendments required for
forthcoming examination.
© ICAI, 2014 3
Learning Objectives
Vouching
General Considerations – Verification – Cash
Transactions
Internal Control Systems
Accounting Principles
Evidence of Transactions / Validity of
Transactions
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Relevance – Exam Perspective
Questions of 12 Marks on the Average
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Vouching
An Intro.
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Vouching
Examining Vouchers Audit
Vouching
Practice
Authenticity
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Vouching 2
Examining/
Documentary
Evidence
Vouching Consists Authority
Appropriate
Account
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Essential aspects in examining voucher
Date of
Voucher/
Within
Accounting
Period
Adjusted
Accounts/
Client’s name
Clearly
Disclosure
Essential
Aspects
Complete Duly
in all respect Authorized
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General Considerations in Audit of Cash
Transactions
An Intro.
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Audit Of Cash Transactions – General Considerations
Bulk
Exposed to
Highly Liquid
Frauds
Cash Transaction
Satisfy
Procedures -
complied
Auditor
Accounting &
Internal Control
Correctly
Recorded
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Internal Control System
Give Protection
Against Losses Fraud Waste Mistakes
Ensure
Transactions Correctly recorded
Enable
Take policy Decision Planning Operation Appropriate Time
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Steps in Verification of Internal Control Systems
An Intro.
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Steps Involved in Verification of Internal Control System
No receipts left unaccounted
System
No Payment without receipt of
good/ service
Study
Financial Powers
Examine
Authorized person
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Steps Involved in Verification of Internal Control
System – 2
Confirm
Supervision
Managerial
Accounting
Adequate
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Steps Involved in Verification of Internal Control
System – 3
Mechanical Aids
Ascertain
Ensure
Proper A/c’ ing
Prevention of Pilferage
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Steps Involved in Verification of Internal Control
System – 4
Ensure
Working of Checks
Observe
Accounting System Counter Checks
Are Applied
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Steps involved in verification of internal control
system - 5
Confirm
Adjusted
Reported System
Existence
Differences
of Assets
Reconciled
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Steps involved in verification of internal control system - 6
• Review Internal Control System
• Periodically
• To plug in loop holes
• Incorporate Changes
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Correctness of Book Keeping Records
Important Ensures Review
• Audit of Cash • System of • Disclose
Transaction Accounting • Mistakes
• Followed • Manipulations
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Observance of Accounting Principles
Capital
Expenditure
Revenue
Distinction
Capital
Receipts
Revenue
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Observance of accounting principles - 2
Matching
Accounting
Principle
Include
Income Expenses
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Observance of Accounting Principles - 3
Outstanding
Assets/Liabilities
Written off
Fictitious Assets
Accounting
At earliest
Principle Include
Depreciated
Fixed Assets
Consistent
basis
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Evidence of Transactions
Supplier Invoices/
Statement of
Entries - Evidences Variety of Forms
Accounts / Minutes
/ Contracts
Two Types of
Internal Evidence External Evidence
Evidences
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Internal Evidences
Normal Course of Business
Counterfoil of receipts, Carbon Copies of Cash memos,
Invoices, etc
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External Evidences
Issued by person – with whom business transaction entered into
Invoice for purchases, lease agreement, bank statement
Certain Evidences – Directly obtained by Auditor
Certificate regarding bank balance, confirmation of debtors balance
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Dependence on Evidences
External Evidence - Preferable
Not Possible for External Evidence
Use Internal Evidence
Normal Course of Working of Business
Internal Check
To prevent subsequent alteration
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Validity of Transactions
Audit Establish Payment Validity Recipient
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Validity of Transactions -2
Fees/Salary
Legal Partnership
Provisions Act
Rules & Companies
Regulations Act
Documentary
Evidences
Minutes of
BOD
Agreement
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Disclosure in the Final Accounts
Objective of Audit Classification Re-classification
Compliance with
Book of Accounts Income & Expenses
Companies Act
Financial Statements Assets & Liability
True & Fair View Grouping of like nature
Description reflect
nature of accounts
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Casting / Totalling
Checking
Lead to
Important
Fraud
Over Under
Totaling Totaling
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Casting / Totalling 2
Receipt Side
Under Casting
Cash Book
Examples
Payment
Over Casting
Side/Cash Book
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Casting / Totalling 3
Deposit
Fictitious
Entries
When no
Examples Deposit is made
Cash Sales As Credit Sales
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Summary
Vouching
General Considerations – Verification – Cash Transactions
Internal Control Systems
Accounting Principles
Evidence of Transactions / Validity of Transactions
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Thank You
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