Meaning of Vouching
Vouching involves not only the substantiating the entry in the books of account with any documentary evidence like assessments, receipts, counterfoils of receipt book or paying-in-book, contracts but also involves seeing that the transactions have been properly authorized, recorded and entered in the books of account. It tests the truth of items appearing in the books of original entry.
In order to be a successful auditor, he should be an intelligent person, have common sense, and be tactful in handling his work. He should go to the source of a transaction and go beyond the books of account. He could discover clever frauds by proper vouching only. Hence he should vouch the items with great care and intelligence. He should thoroughly vouch and satisfy himself at each time as to the authenticity and completeness of transactions in the books of accounts.
Vouching is a method of examination with the help of documentary evidence in order to ascertain the accuracy of the transaction recorded in the books of accounts.
Objectives of Vouching
The main objects of vouching are as follows:
1. Verifying the genuineness of the transactions recorded.
2. Establishing that all transactions relating to the business have been recorded.
3. Determining the authenticity and validity of the documentary evidence.
4. Checking that transactions, which are not connected with the business, are not recorded.
5. Ascertaining that money has been actually paid away by the business in respect of a business transaction only.
6. Ensuring that no fraudulent payments have been made.
7. Ascertaining the correctness of the transactions.
Importance of Vouching
Vouching is a sort of preliminary work, which forms an important part of audit work. Vouching is carried on to ensure that the transactions relating to a particular period have been recorded and there is no voucher left unrecorded in the financial books.
The auditor after satisfying himself as to the authority and authenticity of the transactions says,
“Books of accounts are correct and Balance Sheet and Profit and Loss account exhibit true and correct state of affairs of the business. If the auditor does vouching with care and caution he can proceed well further in his work. That is why vouching is said to be the backbone of auditing”.
This statement seems to be true and correct. 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.
To quote aptly
“Vouching is not only the backbone or essence of auditing but also is its soul. It is the core component of auditing. The entire auditing process and its success depends upon the intelligence and thoroughness with which this part of the work is done by the auditor”.