Meaning and Definition of Vouching

Author:
Helna
Updated date:
Oct 7, 2020

Helna is a postgraduate in commerce who is working as a manager. She loves sharing informative information with her readers.

Vouching Is Equally Important As Passing Of Original Entry In The Books Of Accounts.

The auditor is required to certify the financial statements prepared by the accountant as the statement shows the true and fair view of the results of operations and the state of affairs of the business.

What is vouching?

Vouching of cash transactions

After preparing the Audit notebook, audit planning, auditing working papers, audit preparations, etc., the next step is to proceed with the examination of accounting entries passed in the books of account during the period under review. In this step, the auditor has to check the entries with its supporting documents to determine the accuracy and authenticity of the entries passed by verifying the vouchers, bills, and other supporting documents. This process of checking the evidence of the entries is called vouching. It may be related to cash as well as trading transactions.

The auditor is required to certify the financial statements prepared by the accountant as the statement shows the true and fair view of the results of operations and the state of affairs of the business. Unless he tries to establish the accuracy and authenticity of all the transactions recorded in the books of account, the auditor will be falling from discharging his duty. The exercise of establishing and verifying the accuracy and authenticity of the accounting entries passed in the book of account with reliable evidences are technically called 'vouching'. It means vouching is testing the truth of all the entries made in the book of accounts.

Definition of Vouching

Some of the important definitions by well-known authors are giving below:

Lawrence Dicksee had defined vouching as an act of comparing entries in the books of accounts with documentary evidence in support thereof.

Ronald A. Irish has defined vouching as a technical term that refers to the inspection by the auditor of documentary evidence supporting and substantiating a transaction.

According to F R M De Paula, Vouching does not merely mean the inspection of receipts with the cash book but includes the examination of the transactions of a business together with the documentary and other evidence of sufficient validity to satisfy an auditor that such transactions are in order, have been properly authorized and are correctly recorded in the books.

According to Arthur W Holmes, Vouching is the examination of the underlying evidence which is in support of the accuracy of the transaction. The process of vouching is intended to substantiate an entry by providing authority, ownership, existence, and accuracy.

From the above definitions, we can conclude that vouching is a method of examination to not only substantiate an entry in the books of account with documentary evidence but also to see that these evidences are adequate, reliable, and really connected with the business. For this, the auditor should go beyond the books of account i.e. he should go to the very source of the transaction to see that it is related to the business and is properly authorized.

Objectives of Vouching

The main objectives of vouching are:

To examine the accounting entries recorded in the books of accounts with reference to documentary evidence.
To examine the authenticity of the transactions recorded in the books of account.
To examine the adequacy and reliability of documentary evidence.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.