Vouching of Telephone Expenses

MBA (Banking & Finance) Auditing

Introduction of the topic Vouching:According to L. R. Dicksee “Vouching consists of comparison of entries in the books of accounts with documentary evidence in support thereof.” Ronald A. Irish “Vouching refers to the inspection by auditor of documentary evidence supporting and substantiating a transaction.” Auditors use the word "vouching" to describe a type of evidencegathering activity auditors apply in the substantive testing stage. Vouching is the process of the auditor matching documentary evidence (of an account balance or a transaction) with the details recorded in accounting records and provides evidence as to the completeness, validity or accuracy of an account balance, or underlying class of transaction. When an auditor requires evidence of the validity of an account balance or class of transaction, the auditor gathers evidence that details of the account balance, transaction or economic event recorded in the accounting records is supported by documentary evidence. i.e. the auditor vouches from the accounting records to the documentary evidence (or a "top down" approach). For example, the auditor obtains evidence relating to the validity of purchases recorded in a client's inventory records by vouching from details recorded in the inventory records (e.g. the supplier's name, date purchased, quantity purchased, and the amount of the transaction) to details on suppliers' invoices. When an auditor requires evidence of completeness, the auditor gathers evidence that the account balance, transaction or underlying economic event referred to in the documentary evidence has been included in the accounting records. i.e. the auditor is said to have vouched from the documentary evidence to the accounting records (or a "bottom up" approach). (This "bottom up" approach is sometimes referred to as tracing rather than vouching.) For example, the auditor obtains evidence relating to the completeness of a client's inventory records by tracing details on the suppliers' invoices (e.g. the supplier's name, date purchased, quantity purchased, and the amount of the transaction) to the details recorded in the inventory records. When the auditor requires evidence of accuracy, the auditor vouches from the accounting records to the documentary evidence, although with accuracy, the direction of the vouching is not as critical. For example, the auditor obtains evidence relating to the accuracy of a

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MBA (Banking & Finance) Auditing

client's inventory records either by vouching from details recorded in the inventory records (e.g. date of purchase, unit cost) to details on the suppliers' invoices or by tracing details on the suppliers' invoices (e.g. date of purchase, unit cost) to the details recorded in the inventory records. Documentary evidence has a variety of sources. Documentary evidence may be obtained independently of the entity, such as evidence of the market value of investments, or directly from the entity, such as evidence of the unit cost of inventory. Where it is obtained directly from the entity, the documentary evidence may be either externally sourced, as with a supplier's invoice, or internally sourced, as with standard cost calculations. Thus, the reliability of evidence gathered through vouching is a function of; inter alia, the source of the evidence.

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MBA (Banking & Finance) Auditing

Important Sub Topics Techniques of Vouching:At the time of vouching the auditor must keep in mind the following points:

1.

Dates and Period

The dates appearing on different papers attached with the vouchers should support and correspond with the date as recorded on the transactions. 2.

Correct Allocation

Correctness in allocation of certain amounts can be achieved by thorough examination and scrutiny of documentary evidence attached with the main vouchers. 3.

Arrangement of Vouchers

The auditor must very carefully check the vouchers in the company under audit are arranged in the same order as the entries are made in the books of accounts. 4.

Proper Authorization

All the vouchers must be properly authorized by the competent and responsible authority of the company. The signature of the authorized officers must appear on the voucher and related documents. 5.

Agreement of Accounts

This technique states the fact that the amount stated on the vouchers must be written in both words and figures. 6.

Checking of Accounting Heads

This technique of vouching can be materialized by extensive and detailed checking of the documentary evidence attached with the main voucher.

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MBA (Banking & Finance) Auditing

7.

Arithmetical Accuracy Correct costing of the vouchers is to be ensured by the auditor.

8.

Revenue Stamp

The vouchers established in the company must bear a revenue stamp of proper value according to the requirements of the voucher. 9. Alteration and Duplication Alteration or any kind of duplication must be very carefully checked in the vouchers. .The auditor in this context must thoroughly examine that all vouchers are approved by an authorized and responsible staff member of the company. 10.

Entry in Business Books The auditor once completely satisfied in respect, of the contents of

the voucher and in respect of the above steps, the auditor then reconciles the vouchers with the transactions recorded in the books of the company under audit. 11.

Stamping

Being totally satisfied in respect of the reconciliation procedure, the auditor will put a tick (P) mark against the transactions and simultaneously affix a stamp on the relevant vouchers. 12.

Observations

Comprehensive and complete notes should be taken in context of such items which require further clarification or evidence such as partnership deeds, lease agreements, memorandum and articles of association, minute book and various contracts etc.

Scope of application of instructions on the very subject is primarily confined to the Federal Government, its attached departments and subordinate offices. However, it also extends to such public sector corporations, autonomous and semi autonomous institutions under the Federal Govt., which are established with public funds. Basic rules apply to all concerned. However, provisions have also been made for some exceptions in case of field/operational departments and certain functionaries who genuinely require such facilities. In such cases, a high powered committee of the Cabinet Division and the Finance Division

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MBA (Banking & Finance) Auditing

accords approval after proper examination and scrutiny as per TOR of such committee

When vouching/examining a transaction, the essential points need to be ensured: 

The date of the voucher falls within the accounting period;

 Voucher/transactions therein are duly and properly authorized by the relevant signatory;

 The transactions being examined belongs to the entity and took place during the relevant period;

 The transaction is recorded in the proper account and revenue or expenses is properly allocated to the accounting period;



All transaction which have actually occurred have been recorded

 The posting from the voucher of the amount needs to be correctly taken in the final accounts, disclosed in accordance with recognized accounting policies and procedures.

 The voucher that is being examined need to be properly supported with all and relevant documents Vouching is the process by which an auditor of the company checks for evidence of the transactions that were made in the company during a financial year. The auditor has to submit evidence of his work that it is complete and no information has been left out. If any information has been left, the company can suffer huge problems and losses. It is the duty

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MBA (Banking & Finance) Auditing

of auditor to gather evidence material.

For example, if the company buys raw material, the auditor has to see an evidence of the purchase by collecting the receipt of the purchase so that he can continue making a balance sheet or a list of assets. The information that the auditor collects has to be accurate and precise.

All the information can be obtained by viewing the company's dealing papers in a particular year. It is the duty of the company to maintain such papers.

Review of Theoretical & Practical situations Vouching for Telecommunications Vouching for telecom expenses focus on telecommunications bill cost reduction resulting in an average savings of 35-40% without carrier changes on: • • • • • •

Local telephone bills Long Distance Invoices Frame Relay invoices Managed data service invoices Wireless invoices Internet (IP) and VOIP bills

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MBA (Banking & Finance) Auditing

• • • •

Invoice and Bill Dispute Resolution Tariff Investigation Telecom solutions with emphasis on telecom recovery strategies through credits and refunds Tariff Investigations on billing errors, and overcharges with highest recoveries and refunds.

Reasons to Conduct a Telephone Bill Audit • • • •

Reduce your phone expenses fast (average 36%) Obtain refunds your company is due 90% of today's telecom bills contain errors Audit team Software is included with each audit at no extra cost

A telephone bill audit is different for every client so we provide a free consultation to discuss your needs and wishes. Here is a preface to our phone bill auditing and telecommunications services.

Produce savings: Investigate your telecommunications bills and bring you bill analysis and expert solutions for cost reductions. • • • • • •

Telephone and telecom solution require no carrier changes. Audit team telecom software is included at no extra cost with each audit. Produce invisible phone and telecom audits - the only visible part is the telecom savings Place telecom orders on your behalf with your approval Provide proof of savings with our audits so you can see the actual savings (before and after bills) Security and protection are built into our telecom audits

Telephone Bill Tariff Without a financial analysis of your telecom invoices your company can be sure mistakes and overcharges exist. Take the first step toward reducing your telephone and telecom expense with a complimentary consultation at no charge. Next we can determine how much money you have paid in

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MBA (Banking & Finance) Auditing

error and how quickly we can recover your losses and obtain the refunds you are due. Our clients enjoy quick budget reductions and telephone bill tariff clean up. This reduces your telecom budget and helps you manage and maintain cleaner telecom records with the use of our telecom software given with each audit.

Telecommunications Consulting Services Audit team has a staff of experts trained in telecommunications tariff to eliminate the guesswork(Each senior staff member has over a decade of experience in telecom auditing, some with over 30 years experience) • • • • • • •

Audit team performs a complete telecom analysis of your invoices You receive detailed telecommunications solutions including our telecom software. Dispute Resolution Services Management is easier with our telecom software for maintenance and recordkeeping Audit team guarantees no disruption in your business Audit team ensures services billed are those requested Audit team proves monthly savings and refunds before invoicing

DO YOU CONTROL YOUR TELECOM EXPENSE? • • • • • • • • •

Detailed list of all your locations Detailed list of all phone lines and circuits Detailed list of every feature applied to each line and circuits Detailed list of each function of all circuits and lines Usage for each circuit and line (traffic report) Detailed telecom analysis conducted on fees for lines, circuits, usage, and features Telecom contracts reviewed and analyzed with data above Analysis of tariff performed on all telecom above Detailed records of all orders placed within your telecom department

Merits & de- merits with respect to topic Merits of Vouching:-

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MBA (Banking & Finance) Auditing

1. Vouching is necessary for every registered organization so that the record should be kept with the documentary evidence.

2. Vouching is considered important because it prevents from frauds that could have been done by any one from with in the organization. Vouching is sometimes referred to as verification of the accounting records.

Vouching enable the auditor to know whether the transactions are genuine and valid to enable the auditor to report on the financial statements. 3.

Normally, extensive vouching exercise is done during the depth test/cradle-to grave test. 4.

Vouching enable the auditor to know whether the transactions are genuine and valid to enable the auditor to report on the financial statements. 5.

De- merits of Vouching:Possibility of tampering with accounts by the client's staff. There is a possibility of deliberate alteration in figures after an auditor has checked them. So fraud and error cannot be prevented without further rechecking of records. 1.

More expensive. Continuous audit is comparatively more expensive as the auditor makes several visits and performs detailed work involving more time. Particularly, it is not viable for small enterprises. 2.

Causes inconvenience. The frequent visits by an auditor and regular checking of books so account may dislocate his clients work and cause inconvenience to him. 3.

Chance of negligence on part of auditor. Due to frequent visits of auditor, client’s staff and auditor may develop a social relationship. This may cause auditor becoming negligent in performing his duty. 4.

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MBA (Banking & Finance) Auditing

5. By routine checking we traditionally think of extensive checking and vouching of all entries.

Recommendation •

• •

• •

A telecom consultant should reduce your telecom expense without carrier changes Research the telecom consultant by contacting references Make sure you are in control of the audit and give permission for any changes A good telecom auditor will want to place the approved orders for you, to ensure your bills reflect their findings. Demand proof of savings in the form of before and after bills, before paying for any telecom services.

Conclusion Whether you are an internal or external auditor, vouching and verification is must for substantive audit procedures. By performing vouching and verification, the auditor is able to ensure the adequacy of the internal controls and accounting systems and finally accuracy, existence, completeness etc of the end balances in the financial statements hence able to form an opinion whether the financial statement reflects a true and fair figure. •

Reducing and restructuring some of our rates.

•

Creating and distributing reports of services to which departments are subscribing, but which may be underutilized, and which departments may wish to consider discontinuing.

•

Offering and exploring additional services which may help departments maintain their levels of customer service to callers to their department.

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MBA (Banking & Finance) Auditing

•

Helping departments understand how existing service offerings can help them be more effective and reduce expenses.

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