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Meaning and objectives of Vouching

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Meaning and objectives of Vouching

Vouching, widely recognized as “the backbone of auditing,” is a component of an audit seeking to authenticate the transactions recorded in a firm’s book of accounts. When an accounting transaction is vouched, it is tested and verified by presenting relevant documentary evidence.

It is the practice followed in an audit, with the objective of establishing the authenticity of the transactions recorded in the primary books of account. It essentially consists of verifying a transaction recorded in the books of account with the relevant documentary evidence and the authority on the basis of which the entry has been made; also confirming that the amount mentioned in the voucher has been posted to an appropriate account which would disclose the nature of the transaction on its inclusion in the final statements of account. Vouching does not include valuation.


Objectives:

Main objective of vouching is to find out the regularity or irregularity of transactions, frauds and errors. Regularity means maintaining record and performing the work compliance with the rules, regulation and law. But irregularity means doing the work crossing to the line of rules, regulation and laws. Some of the major objectives of vouching are given below:


1. To Detect Errors And Frauds

All transactions are to be supported by evidence. Each document should be proved by authorized authority. With the help of vouching we can detect errors and frauds by verifying each transaction. Planned fraud can be detected through vouching.


2. To Know The Truth Of Account

Each and every transaction is checked and ratified on the basis of support document. So, we can easily know the truth of account.


3. To Find The Unrecorded Transactions

Each and every transaction is checked and ratified on the basis of document. Vouching helps to find out the unrecorded or missing transactions. If any voucher is found unrecorded, auditor can suggest to record such transactions.


4. To Know That All The Transactions Are Authorized

If the transactions are made on the consent of concerned authority, such transactions are known as authorized transactions. If transactions are not authorized, such transactions can be fictitious transactions. So, such fictitious transactions ca be found with the help of vouching.


5. To Know That Only The Business Transactions Are Recorded

Sometimes, transactions are performed for individual purpose but payment is made out of business. Such transactions should not be recorded in account of business. If such transactions are recorded, we can find it with the help of vouching. To know the real profit or loss of business, such transactions are to be separated.

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