Vouching of Cash Transactions | Points to be considered

Vouching of Cash Transaction

In a business concern, cash book is maintained to account for receipts and payments of cash. It is an important financial book for a business concern. Errors and frauds arise mostly in connection with receipts and payments of cash by making misappropriations wherever possible. Hence the auditor should see whether all receipts have been recorded in cash book and no fictitious payment appears on the payment side of cash book.

General Points to be Considered while Vouching Cash Transactions

The auditor should consider the following general points while vouching the cash transactions:

1. Internal Check System: Before starting the vouching of cash book, the auditor should enquire about the internal check system in operation If there is no well organized internal check system, there are lot of chances of misappropriation of cash. He should study carefully the internal check systems regarding cash sales and other receipts.

2. Examination of Test Checking: As far as possible, all cash transactions are to be checked elaborately. However, if the auditor is satisfied that there is an efficient internal check system, he can resort to test checking. 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.

3. Comparison of Rough Cash Book with the Cash Book: Usually, cash receipts are entered first in the rough cash book before they are entered in the cash book. The auditor should examine the entries in the rough cash book and main cash book and then compare them to detect whether there is any error or irregularity.

4. Examine the Method of Depositing Cash Receipts Daily: The auditor should examine the method adopted for depositing daily cash receipts in bank. The pay in slip should invariably be used for this purpose.

5. Preparing of Bank Reconciliation Statement: The auditor should prepare a Bank Reconciliation Statement verifying the bank balance with cash book and pass book and find out the reasons for the difference between the bank balance as per Pass Book and that of in the Cash Book.

6. Verification of Cash in Hand: The auditor should verify the cash in hand by actually counting it and see whether it agrees with cash book balance.

7. Ensuring Proper Control of Receipts Book: The auditor should see whether receipt books are kept under proper control. While doing so, he should enquire as to whether all receipts are in printed forms, whether counterfoil receipts are used or a system of carbon copy is used, and all receipt books and all receipts are separately and consecutively numbered.

He should compare the particulars as regards to date, amount, name, etc. with cash book entries. If there are certain entries in cash book for which receipts have been issued, they should be carefully checked. The receipts have to be signed by a responsible officer, and not by the cashier.

The unused receipt book should be kept in safe custody with some responsible officials. Along with cash receipt, the rule for granting cash discount should be examined. If there is a system under which a receipt accompanies the receipt of cash, such a receipt, usually known as delivery note should be properly signed and returned to the customer.

Related Post

Share the Knowledge: