How would you vouch the Receipts side of your client’s Cash Book
Cash Book is one
of the most important books of account and the objects, for which a detailed
audit of the cash books is carried out, are to ensure that all receipts have
been accounted for and that the payments made and recorded are neither
inaccurate nor improper and that the amount of cash in hand and the balance at
bank are correct.
The vouching of
the receipts side of the Cash Book is more difficult than the payment side,
since only indirect evidence can, as a rule, be obtained.
The auditor has
to guard against the omission of cash receipts and has to rely considerably on
the system of internal check in force. Therefore, he should carefully examine
the system of internal check relating to the receipts and should pay special
attention to its weak points.
Auditor may
proceed with the work of vouching cash receipts on the following lines:
1) Opening Balance – It should be compared
with the balance shown in the audited balance Sheet of the previous year to
ensure that actual balance has been brought down;
2) Cash Received from A / Receivables –
The auditor should see that the persons handling remittances received take no
part in the preparation and sending out of statements to Debtors. Vouch
counterfoils of the receipts issued with the entries in the Cash Book, and
ascertain that the issue and custody of Receipt Books is in the hands of a
responsible officer of the firm.
3) Cash Sales – In this case records
available will largely depend upon the nature of the business, but the auditor
should see all available evidence when vouching Cash Sales, because this forms
a most likely avenue for frauds. Assuring a proper system of internal check in
force he should check the carbon copies of cash memos with the salesman’s
summaries and the cashier’s abstracts, tracing the total of daily cash sales in
the cash sales book;
4) Capital Receipts – Capital contributed
can be vouched by obtaining confirmation from the proprietors of the business.
Where any capital assets, such as plant and machinery, investments, etc, are
sold, auditor should vouch the sale proceeds with contracts of sale,
correspondence or other documents and see that the proceeds less any expense
incurred have been fairly accounted for.
5) Proceeds of Bill Receivable – Check
cash receipts from bills discounted or matured with the Bills Receivable Book
and see that all matured bills have been accounted for.
6) Income from Interest, Dividends etc –
Interest received on accounts of fixed Deposits in the bank should be vouched
with the bank Pass Book, the genuineness of Pass Book must be ascertained.
Dividends received can be checked from the counter-foils of “tops” of the
Dividend Warrants or the letters covering cheques. Interest received on
Securities can be vouched from the securities themselves or from the investment
ledger as to the date of the receipt of interest, amount, rate, etc.
7) Commission – It can be checked with the
account of the parties from whom commission is to be received. Agreements
regarding rate of commission should also he inspected.
8) Miscellaneous Receipts – Any other
receipt, such as rents, bad debts, dividends, subscriptions, contributions,
insurance claim money share capital, income from hire purchase agreements etc,
can be checked from relevant evidence available, such as leases, correspondence,
agreements, receipts etc.
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