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    Vouching of Cash and Bank Transactions

    1. What is meant by Vouching
    • Vouching is a process of checking the vouchers related to the transactions recorded in the books of accounts.
    • Vouching is the essence of the Auditing. The object of vouching is to Gain assurance regarding the existence assertion. 
    • Vouching tracks a result backward to the originating event, ensuring that a recorded amount is properly supported. 
    1. Points to should be considered while Vouching 
    • Arranged Voucher: All the voucher should be consecutively arranged and Pre-numbered cash vouchers should be used. 
    • Checking of Date:The date of the voucher falls within the accounting period. 
    • Checking of authority: Voucher should be authorized as per internal policy framed by the organisation. 
    • Cutting and Change: There should be no changes in the voucher. Any person for making the fraud can change the time, amount, date and name concern. So, this changes can't be acceptable till the approval authority has made the signature for that changes. 
    • Compare the Words and Figures: The auditor should satisfy himself amount written on the voucher, it figures and words are same or not. 
    • Transaction must relate to Business: The transaction should relate only to the business aspects of the organization and transactions of personal nature should not be recorded. 
    • Checking of Head of Account: Auditor must be satisfied about the head of account in which cash received or paid. The transactions should be clearly classified into revenue or capital transactions and accordingly entered in the books of accounts. 
    • Cancelled Voucher’s: The auditor should not accept the cancelled vouchers. In this cases there will be a chances of double payments. 

    Check list for vouching of Cash & Bank Transactions 

    1. Internal check System : Steps should involve in the verification of Internal Control System,
    • Review the Segregation of Duties 
    • Examine the financial power vested in the different persons and conditions under which they exercise them. 
    • Segregation Duties: Segregation of duties is a key internal control in any organisation. The purpose of this segregation of duties is to minimize the opportunity for an employee to misappropriate funds and avoid detection. 

    Cash handling duties can be divided into four stages: 

    o             Custody.                              O            Recording 

    o             Authorization                   O            Reconciling

    • Depositing 
    1. Documentary Evidence of Transactions: Examine all the vouchers with the appropriate documentary evidence. Documentary Evidence is of two types, 
    • Internal Evidence : Created and used and retained within the organization 
    • External Evidence:Originate outside the client’s organization. Examples: Bank Statement, Supplier Invoice, Insurance policies, etc. 

    Points should be considered while verifying the evidence: 

    • Date 
    • Nameand Address
    • Amount
    • Period
    • Entryinthe books of accounts 
    1. Examine the Method of Depositing Cash Receipts Daily: Examine the method adopted for depositing daily cash receipts in bank. The pay in slip should invariably be used for this purpose. 
    1. Verification of Cash in Hand: Verify the cash in hand by actually counting it and see whether it agrees with cash book balance. 
    2. Revenue Stamps: The stamps are required according to the valuation of the amount and cash For the stamps, The stamps Act, 1899 is applicable while fixing the revenue stamps. Ensure that cash payments exceeding Rs.5000/- should be supported by a revenue stamp.
    3. Petty Cash Transactions: 

    Understanding Imprest petty cash fund system in existence to control petty cash. ØVerifythe Pre-numbered petty cash vouchers should be used for withdrawing cash from the

    fund and same should be supported by appropriate bills. ØEnsure that limit should be placed on the size of reimbursements. 

    1. Opening Balance Verification: Match the opening balance of the Cash & Bank Balances as reflected in the Cash Book with the closing balance as per the audited financials of the previous year. In case of any discrepancy in the amounts, the same is to be noted and clarification is required from the Management. 
    1. Balance Confirmations from Banks: Cross check bank balances as per books with confirmations received from banks. 
    1. Verification of Bank Reconciliation statements: 
    • Checkthat Bank reconciliation statements in respect of all the bank accounts are prepared on a monthly basis.
    • Checkthat the entries appearing in the Bank reconciliation statements are cleared in the subsequent month. 
    • Checkthat entries relating to cheques issued but not presented for payment for more than 6 months are reversed 
    1. During verification, the following points are also to be taken care of: 
    • Ensurethat there is no unrecorded cash. 
    • Authorization of cheques is made as per the delegation.
    • Checkthat payments are made only against original supporting.
    • Checkthat cheque books / counter foils are kept in safe custody. 

    Generally the below frauds are identified while vouching of cash & bank transactions, 

    • Teaming and Lading 
    • Theftof cash
    • Cashreceived is not brought to account
    • Payments are illegally transferred or diverted by making duplicate payments, paying the wrong person, or by increasing the value of one payment at the expense of another. 
    • Invoices are falsified or duplicated in order to generate a false payment 

    "Don't go through life, grow through life" - Eric Butterworth

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