AUDITING &

ASSURANCE
VOUCHING,VERIFICATION&VALUATION
FOR SEM-V
By C.P & J.J
VOUCHING
⦿ Vouching is a technical term that refers to the
inspection of documentary evidence supporting and
substantiating a financial transaction, by an auditor.
It is the essence of auditing[1]
⦿ Vouching 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 OF VOUCHING • To ensure
recording of all transactions. • To verify that
all transactions recorded in the books of
accounts are supported by a documentary
evidence. • To verify the validity of the
vouchers which support the entries and to
ascertain whether these are authentic,
addressed to the business and properly
dated. • To verify that no fraud or error has
been committed while recording the
transactions in the books of accounts. • To
ensure that the vouchers h
⦿ Importance of Vouching
⦿ Vouching forms the base for auditing and has an important part
of Auditor’s duty. In case of negligence in vouching, the Auditor
will be held responsible; he cannot escape from his duty, if he
has done vouching carelessly. Following points show the
importance of vouching −
⦿ Vouching is equally important as passing of original entry in the
books of accounts. If, original entry is wrong, it will affect every
process of accounting entry and its impact will be till the end
result. Similarly, vouching is base of all auditing process.
⦿ Efficiency of vouching will decide the success of audit.
⦿ Any errors and frauds are easily detectable if vouching is
conducting in searching and intelligent manner.
⦿ Intelligent and faithful vouching will establish reliability on
financial statements, i.e., Profit and Loss account and Balance
Sheet of any organization.
⦿ If adequate internal control system exists, the Auditor may
choose to do test checking instead of complete vouching.
⦿ types of Voucher
⦿ There are two types of vouchers −
⦿ Primary Voucher − Original copy of written
supporting document is called primary
voucher. Like purchase Bill, cash memo,
pay-in-slip, etc.
⦿ Collateral Voucher − Copies of supporting
documents which are not available in original
are collateral voucher like duplicate or
carbon copy of sale invoice.
SOME EXAMPLES OF VOUCHERS
⦿ Sales:Sales order, sales invoice, goods
outward register, cash receipt, bank
pay-in-slip, etc
⦿ Purchase: Quotations, purchase orders,
purchase bills, goods inward register, etc
⦿ Cash Payments: Demand note, cash receipt,
cash memo, etc.
⦿ Cash Received:Duplicate or carbon copy of
cash receipt, contracts and correspondence
with payee, etc.
VERIFICATION
⦿ Verification means the act of assuring the correctness of
value of assets and liabilities in the organization. It
refers to the examination of proof of title and their
existence or confirmation of assets and liabilities on the
date of Balance Sheet. 
⦿ Spicer and Pegler defines Verification as, “An inquiry
into the value, ownership and title, existence and
possession and the presence of any charge on the asset”.
⦿ J. R. Batliboi defines it as, “The auditor must satisfy
himself that assets really existed at the date of the
Balance Sheet and were free from any charge and that
they have been properly valued”.
OBJECTIVES
The objectives of verification are as follows:
⦿   To show the correct value of assets and liabilities.
⦿  To know whether the Balance Sheet exhibits a true and
fair view of the state of affairs of the business.
⦿  To find out the ownership, possession and title of the
assets appearing in the Balance Sheet.
⦿  To find out whether assets are in existence.
⦿ To detect frauds and errors, if any while recording
assets in the books of the concern.
⦿  To find out whether there is an adequate internal
control regarding acquisition, utilization and disposal of
assets.
⦿   To verify the arithmetic accuracy of the accounts.
AUDITOR’S DUTY REGARDING
VERIFICATION

Legal
Ensuring
Ensuring Acquiring ownership Ensuring
that the
the the assets and the proper
assets are
existence for possession valuation of
free from
of assets. business. of the assets.
any charge.
assets.
IMPORTANCE
⦿ Showing the Actual Financial Position:
Balance Sheet is prepared to show the actual financial position
of a business. If proper valuation is not made, such Balance
Sheet does not provide true and fair information.
⦿ Ascertaining the Real Position of Profit or Loss:
Depreciation and other expenses on assets will be incorrect if
proper valuation of assets is not made. So, to calculate the
actual amount of profit or loss, proper valuation of assets and
liabilities is necessary.
⦿ Increase Goodwill:
Proper valuation gives fair information about profitability and
financial position of a business. So, people can get information
which creates positive attitude towards company. 
⦿ Assures Safe Investment to Shareholders:
Verification and valuation provide actual information about
assets and liabilities to the shareholders which assure safety of
their investment.
⦿ Easy for Sale:
At the time of sale of the company, it can be sold at the
price which is enlisted in the Balance Sheet, but the assets
whose valuation is not made need valuation before selling
the company.
⦿ Easy to Get Loan:
Companies disclose the Balance Sheet proved by auditor for
public knowledge which increases the trust of the company.
Hence, companies can easily obtain loan from financial
Institutions.
⦿ Easy to Get Compensation:
Whenever the loss occurs due to any incident, insurance
company provides compensation on the basis of valuation of
assets. So, the company can easily get compensation.
BASIS FOR VOUCHING VERIFICATION
COMPARISON
Meaning Vouching means checking the Verification means a
accuracy of the transactions process to substantiate
recorded in the books of the validity of assets and
accounts. liabilities appearing in
the Balance Sheet.

Basis Documentary Evidence Observation and

Documentary Evidence
Examination of Items of Profit & Loss account Items of Balance Sheet

Carried out by Audit clerks Auditor

Time Horizon Year-round At the end of the

financial year.
Objective To examine the correctness, To confirm the
validity and completeness of ownership, possession,
the transactions. existence, valuation and
disclosure of the items
appearing on the
Balance Sheet.
VERIFICATION OF NON CURRENT
ASSETS
GOODWILL: Goodwill is also an asset of the company. When any
firm or company is purchased good will is also included in the
purchase. To verify the value of goodwill auditor has to examine
the purchase agreement. Auditor should find out from the
purchase agreement that the amount of this asst is correct. Good
will usually appear in the balance sheet at cost. There is no legal
compulsion to write it. If company likes to write off then auditor
should see that the amount written off is according the resolution
of the board. Important point about goodwill is that it does not
depreciate by use.
• verify the ownership of patent
by inspection of certificate
issued in respect of grant of
the patent.
• See that the renewal fees in RIGHT:
respect of patent have been
duly paid and debited to P/L PATENT
A/c.
• The auditor may obtain
confirmation letters from
client’s legal advisor as to
validity & existence of patents.
• Obtain a schedule of
copyrights held by the
client.
• Verify purchase of
copyright with reference to
approval from competent COPYRIGHT:
authority and contract
entered into between the
author from whom
copyright was purchased
and the publisher,i.e the
client.
• He will go through the plant register
containing detailed particulars of various items
of plant & machinery. It should show separately
for each item the original cost, addition to and
sales from it during the year.
• The total of closing balances of all items of
plant and machinery should be reconciled with
the balances in the general ledger.
MACHINERY:
• If there has been any addition, it should be
verified with the invoice of the machinery
PLANT &
supplied.
• He should verify title deeds,agreements &
other ownership documents.
• The auditor should periodically physically
examine various items of plants and
machinery,say once in every three or five years
, depending upon the size of the concern.
• Verify the authorization for purchase of investment. Auditor
should review board minute book (book which record the
conclusion of meeting) for authorization.
• Vouch the entries in brokers contract note, share certificate
and cash book.
• Examine the share certificate to ensure that the type of
security and number of share agrees with investment
account and that the share held in the company with its
name.
• Verify that the investments are properly classified and
disclosed as stated in Companies Act. INVESTMENTS:
• 5. Audition should verify the Memorandum of Association to
ensure authority for purchase such investment.
• 6. Where investments are in large numbers, the auditor
should obtain the schedule of securities certified by a senior
officer of the company.
• 7. Obtain the schedule of investment comprises for
information about the name of the securities / investment,
date of their acquisition, nominal/ face value, cost price,
book value, paid up value market value, rate of interest
applicable, dates of interest due, tax deduction, etc., at
the date of Balance Sheet.
• To obtain a list of all loans & advances
outstanding and check the agreement
of balances as shown in the schedule
with those in ledger account.
• To inspect agreements to satisfy
himself about the validity and
accuracy of loans and advances
granted.
ADVANCES:
• To see that there are
acknowledgement of parties in respect
LOANS &
of outstanding loans and advances.
• To see that loan, if material has been
granted only when there is
authorisation by MOA &AOA
• To verify that loans and advances are
being recovered regularly by agreed
instalments.
VERIFICATION OF CURRENT ASSETS
• Examine the bank reconciliation statement
prepared as on the last day of the year.
• Examine whether a reversal of the relevant
entries would be appropriate under the
circumstances.
• In respect of fixed deposits or any other type
of deposits with banks, examine the relevant
BALANCE:
receipts/ certificates, duly supported by bank
advices.
BANK
• Remittances shown as being in transit should
be examined with reference to their credit in
the bank in the subsequent period.
• Examine whether suitable adjustments are
made in respect of cheques which have
become stale as at the close of the year.
• The auditor should examine the AOA &
MOA to know the power of the company
to raise loan & its limits.
• He is required to go through the
minutes of board to see whether there
is authorisation of raising loan.
• He should enquire into the purpose of
taking loan & whether the amount of
LOANS:
loan has been utilised for that purpose.
• The loan agreement entered into
SECURED
between the client & borrower should
be examined to know whether terms &
condition are in the interest of the
company.
• He will see that secured loan has been
properly disclosed in balance sheet as
per schedule 3 of companies act 2013.
LIABILITY
VERIFICATION OF NON CURRENT
• The postings in purchase ledger are to be
checked by verifying the books of prime
entry. The postings may be checked for
part of a year.
• The balances shown in creditors’ schedule
prepared by the management are to be
verified with the statement of accounts
obtained from the creditors.
• The credit entries relating to discounts,
returns, rebates etc., made in the
CREDITORS:
suppliers’ accounts are to be verified
with the statement of accounts obtained SUNDRY
from them.
• The ledger accounts are also to be
verified with Goods Inward Book to
confirm that all goods received before
the close of the year are duly accounted
for.
• The Return Outwards Book is to be
compared with the ledger accounts and
confirm that all the returns are supported
by the Credit notes of the suppliers.
LIABILITY
VERIFICATION OF CURRENT
THANK YOU!