The discount allowed to customers should be properly authorized by a responsible officer. But all this depends upon the efficiency of the auditor. Vouching is a sort of preliminary work which forms an important part of audit work.
To ensure that there should be no violation of Income Tax rules as payment of loan exceeding Rs.
He can verify the cash receipt in the cash book with the counter foil or carbon copy of the receipt issued to the party. Before setting the programme for vouching the cash book, an auditor should examine carefully the whole system of internal check in operation in respect of cash transactions.
Freight inward charges, installation charges, erection and commissioning charges should be capitalized. Interest and dividends : Interest and dividends received from investments should be vouched in the following manner: i receipts on this account should be checked with the counterparts of the interest and dividend warrants or the letters along with the cheques.
For missing vouchers, the auditor should satisfy himself with regard to the reasons of their being lost. All vouchers have been properly filed, serially numbered and arranged in order as it saves time in finding out a particular voucher in checking. Ensure that the unused counterfoil receipts are kept in safe custody.
Payment of wages at higher rate than allowed.
The purpose of this segregation of duties is to minimize the opportunity for an employee to misappropriate funds and avoid detection. An auditor can resort to test checking only if he has satisfied himself that there is an efficient system of internal check.
Internal Check System: Before starting the vouching of cash book, the auditor should enquire about the internal check system in operation If there is no well organized internal check system, there are lot of chances of misappropriation of cash.