AUDITING PROJECT

08/CM/04
Acknowledgement
The satisfaction that accompanies the successful completion of any task would
be incomplete without mentioning the names of people who made it possible,
whose constant guidance and encouragement crowns all efforts with success.

First I would like to acknowledge my sincere thanks to Dr.Sr.Jasintha Quadras,

Principal, Stella Maris College, for her invaluable blessings. I wish to express
my gratitude to Dr.Agnes Rozario, Head of the commerce department for her
enthusiastic encouragement.

I would like to thank Ms.Jesintha Preethi Francena, lecturer, commerce

department and teacher incharge for auditing, with deep sense of gratitude for
her enormous support and guidance throughout the project.

Declaration
This is to declare that the project titled, “VOUCHING AND VALUATION OF
ASSETS”, has been conducted by me in person.

This is neither a reproduction of any of the studies previously conducted nor

copied from any other source of information.

Introduction
The general definition of an audit is an evaluation of a person, organization,
system, process, enterprise, project or product. The term most commonly refers
to audits in accounting, but similar concepts also exist in project management,
quality management, and energy conservation. Auditing is a process by which a
competent, independent person accumulates and evaluates evidence about
various assertions contained in financial statements of an entity for the purpose
of determining and reporting the quality of disclosure of financial information,
judging them against the back drop of established criteria. Essentially auditing
is a process, a professional exercise, conforming to the quality parameters of
generally accepted auditing practices.

Definitions for Auditing

The Definition for Auditing and Assurance Standard (AAS) 1 by ICAI -
"Auditing is the independent examination of financial information of any
entity, whether profit oriented or not, and irrespective of its size or legal form,
when such an examination is conducted with a view to expressing an opinion
thereon."
According to the Institute of Cost and Management Accountants of Pakistan, a
cost audit is "an examination of cost accounting records and verification of
facts to ascertain that the cost of the product has been arrived at, in accordance
with principles of cost accounting."

An audit must adhere to generally accepted standards established by governing

bodies. These standards assure third parties or external users that they can rely
upon the auditor's opinion on the fairness of financial statements, or other
subjects on which the auditor expresses an opinion.

Audits in accounting
Audits are performed to ascertain the validity and reliability of information;
also to provide an assessment of a system's internal control. The goal of an
audit is to express an opinion on the person / organization / system (etc.) in
question, under evaluation based on work done on a test basis.

Due to practical constraints, an audit seeks to provide only reasonable

assurance that the statements are free from material error. Hence, statistical
sampling is often adopted in audits. In the case of financial audits, a set of
financial statements are said to be true and fair when they are free of material
misstatements - a concept influenced by both quantitative (numerical) and
qualitative factors.

Auditing is a vital part of accounting. Traditionally, audits were mainly

associated with gaining information about financial systems and the financial
records of a company or a business (financial audit). However, recent auditing
has begun to include non-financial subject areas, such as safety, security,
information systems performance, and environmental concerns. With nonprofit
organizations and government agencies, there has been an increasing need for
performance audits, examining their success in satisfying mission objectives.
As a result, there are now audit professionals who specialize in security audits,
information systems audits, and environmental audits.

In cost accounting, it is a process for verifying the cost of manufacturing or

producing of any article, on the basis of accounts measuring the use of material,
labour or other items of cost. In simple words the term, cost audit, means a
systematic and accurate verification of the cost accounts and records, and
checking for adherence to the cost accounting objectives.
Vouching
The act of examining vouchers is referred to as vouching. 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.

Definition of Vouching
Ronald A. Irish has defined vouching as a technical term which 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 mean merely the inspection

of receipts with the cash book, but includes the examination of the transactions
of a business together with 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.

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 known as vouchers.
• To examine the authenticity of the transactions recorded in the books of
account.
• To examine the adequacy and reliability of documentary evidence.

Significance of Vouching
After preparing Audit note book, 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 called is vouching. It may relate to cash as well as
trading transactions.

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, 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 the testing the truth of all the entries
made in the book of accounts.

CONTENTS
1. OBJECTIVE OF THE PROJECT
2. LIMITATIONS TO THE PROJECT
3. THEORY – INTRODUCTION TO AUDITING, etc
4. COMPANY’S PROFILE
5. PROJECT REPORT
6. CONCLUSION
7. BIBLIOGRAPHY
8. ANNEXURES
OBJECTIVE OF THE PROJECT
The main object for this project is to provide us, the students of auditing, basic
knowledge about, how vouching and valuation of assets are carried in an audit
firm.

Other objectives:

To be familiar with auditing practices and procedures.

To practically view how vouching and valuation of assets are done in an audit
firm.

To implement our theoretical knowledge on different topics of auditing.

To identify errors if any.

To rectify the identified errors.

To view how audit is done for various types of organizations such as hospitals,
government institutions, business organizations, service organizations,
charitable institutions, religious organizations etc.

LIMITATIONS TO THE PROJECT