Vouching & Verification MCQ Quiz - Objective Question with Answer for Vouching & Verification - Download Free PDF

The correct answer is Voucher

Key Points

Vouching:

• Vouching is defined as the verification of entries in the books of account by examination of documentary evidence or vouchers, such as invoices, debit and credit notes, statements, receipts, etc.
• All such types of documentary evidence are known as vouchers.

Additional Information Journal Entry: The recording of a transaction in the books of account is called journal entry.

Cash book: Cash book is a subsidiary book in which all cash transactions are recorded.

Pass book: All the cash inflow and outflow transactions in the bank account is recorded in pass book which is maintained by Bank.

The Correct Answer is- In verification of assets, the duty of auditor is to satisfy himself with regard to the existence, ownership and value of the assets.

Key Points

•  Verification is an auditing approach in which the auditor verifies the accuracy of all assets and liabilities listed on the balance sheet.
• In his report, the auditor attests to the accuracy of the asset and liability side of the balance sheet. Verification of assets and liabilities is the basis for the auditor's confirmation.

Important Points

Duty of an auditor in relation to verification of assets:​

While verifying assets, the auditor should pay close attention to the following:

1. Whether or not all assets are listed on the balance sheet.
2. Whether or not the valuation was done correctly.
3. Whether or not assets existed on the date of the balance sheet and were owned by the company.

The Correct Answer is- In vouching, an auditor verifies both the authority and authenticity of transactions.

Key Points

• Vouching is the process of examining documentation evidence to evaluate if it adequately supports accounting entries.
• An auditor who is vouching is looking for any inaccuracies in the amount recorded in the accounting records, as well as ensuring that the transactions are documented in the correct accounts. The auditor also checks to see if transactions were lawfully authorized.
• When vouching reveals an issue, the auditor may need to expand the sample size being audited to ensure that the system is functioning properly. A different option is to engage in various auditing techniques.

The correct answer is Verification.

Key PointsVerification

• Verification is the process of ensuring that the organization's assets and liabilities are valued correctly.
• It refers to the verification of assets and liabilities as of the balance sheet date, as well as the inspection of title documentation.
• It typically refers to the verification of any organization's assets, which can be accomplished by looking at the values, ownership, existence, and possession of any assets as well as making sure they are free from any debts.
• Verification can be defined as "proving the truth or confirmation" in basic terms.

 Important PointsDefinition given by Spicer and Pegler, Verification as, “An inquiry into the value, ownership and title, existence and possession and the presence of any charge on the asset”.

Objectives of Verification

• To accurately display the worth of both assets and liabilities.
• To determine whether the balance sheet accurately and fairly depicts the company's financial situation.
• To learn who owns, has, and is entitled to the assets listed on the balance sheet.
• To ascertain the existence of assets.
• To find any frauds or mistakes made when documenting assets in the company's finances.
• To determine whether the asset acquisition, use, and disposal processes are adequately controlled internally.
• To check the accounts' accuracy in mathematics.
• To make certain the assets have been accurately reported.

Hence, it can be concluded that the correct answer is option 1. 

The correct answer is Vouching includes valuation. whereas verification does not include valuation. 

Key Points

• Vouching:
  • It is the process of checking the authenticity of the transactions recorded in the books of accounts.
  • In this process, the auditor compares the entries in the business's books with the corresponding supporting documents such as invoices, receipts, and others to confirm that the transactions are recorded correctly and are legitimate.
  • Vouching does not include the process of valuation as it is primarily focused on the verification of financial transactions and their supporting evidence, not the value of assets or liabilities.
• Verification: 
  • It refers to the process of validating the existence, ownership, and value of the assets and liabilities that appear on a company's balance sheet.
  • It involves checking things like legal ownership documentation for fixed assets, valuation records, and physical counts of inventories, among other details.
  • This means that verification does include valuation, as it requires checking that assets and liabilities are recorded in the accounts at their correct, appropriate value.
• So, in simple terms, while vouching is about scrutinizing evidentiary details of transactions to ensure their credibility, verification involves a deeper examination of assets and liabilities to ensure their rightful existence, possession, and valuation, making statement 4 in your original list incorrect.

The Correct Answer is- In verification of assets, the duty of auditor is to satisfy himself with regard to the existence, ownership and value of the assets.

Key Points

•  Verification is an auditing approach in which the auditor verifies the accuracy of all assets and liabilities listed on the balance sheet.
• In his report, the auditor attests to the accuracy of the asset and liability side of the balance sheet. Verification of assets and liabilities is the basis for the auditor's confirmation.

Important Points

Duty of an auditor in relation to verification of assets:​

While verifying assets, the auditor should pay close attention to the following:

1. Whether or not all assets are listed on the balance sheet.
2. Whether or not the valuation was done correctly.
3. Whether or not assets existed on the date of the balance sheet and were owned by the company.

The correct answer is Monthly statements sent to customers

Monthly statements sent to customers are not relevant for vouching for cash sales. Monthly statements are issued to all customers irrespective of cash or credit sales.

Key Points

Vouching:

• Vouching is defined as the verification of entries in the books of account by examination of documentary evidence or vouchers, such as invoices, debit and credit notes, statements, receipts, etc.
• All such types of documentary evidence are known as vouchers.

Important Points Vouching Cash Sales:

Daily cash sales summary: This is the summary of the daily amount of cash sales made by the company. This is a principal document in vouching for cash sales.

Monthly statements sent to customers: This document is not relevant for vouching for cash sales since monthly statements are issued to all customers irrespective of cash or credit sales.

Salesmen's statement: This document is useful in vouching for cash sales since it is the statement maintained by the salesman through which all the sales are made.

Bank statement: All the cash sales are made by making payments in cash or through a bank. The bank statement shows all the money received against sales made. This proves a useful document in vouching cash sales.

The correct answer is All of the above.

Key Points

Vouching:

• Vouching is defined as the verification of entries in the books of account by examination of documentary evidence or vouchers, such as invoices, debit and credit notes, statements, receipts, etc.
• All such types of documentary evidence are known as vouchers.

Important Points Vouchers:

• The use of vouchers during an audit is essential.
• They are an important source of proof since they verify the reality of the goods and services listed on the financial accounts.
• Primary voucher refers to the written evidence in original. Examples of primary voucher are purchase invoice, cash receipt, bills, Counterfoils, confirmation of balances, bank statements, contracts, etc.
• When the original voucher is not available, copies thereof are produced in support or as subsidiary to remove suspicion and to satisfy the auditor, such a voucher is known as Collateral Voucher.

The correct answer is (ii), (iii) and (iv).

Key Points

• Examine Purchase Book:
  • The purchase book records all credit purchase transactions made by the organization.
  • Verifying the purchase book ensures that:
    • All purchase transactions have been accurately recorded.
    • Only authorized and legitimate purchases are included in the books.
    • Duplicate or fictitious entries are not present, which helps safeguard against potential fraud.
  • This is essential as it ensures the integrity of the organization's purchase records.
• Examine Purchase Invoices:
  • Purchase invoices are critical documents that act as proof of transactions between the organization and its vendors.
  • Verifying these invoices ensures:
    • The transaction is genuine, as supported by the invoice from a legitimate vendor.
    • The pricing, quantities, and terms of the purchase are accurate and match the agreed conditions.
    • Goods or services have been received as per the purchase order.
    • There are no discrepancies between the invoices and the entries in the books of accounts.
• Examine Numerical Sequence of Source Documents:
  • Source documents, such as invoices, delivery notes, and purchase orders, are often issued in a numerical sequence.
  • Ensuring the proper sequence of these documents helps to:
    • Identify missing documents, which could indicate fraudulent transactions or omissions.
    • Ensure completeness of purchase records, as gaps in the sequence might reflect unrecorded transactions.
    • Detect any irregularities or manual alterations in the numbering that could suggest tampering.

Additional Information

• Examine Sales Book:
  • This is not required when vouching purchases, as the sales book pertains to revenue transactions and is unrelated to purchases.
  • Including the sales book in this process would waste time and resources without contributing to the objective of vouching purchases.

The correct answer is Books of original entry.

Key Points

• Vouching is the process of looking over vouchers to make sure that the entries made in the books are accurate.
• Verifying a transaction that has been recorded in the books of accounts using supporting documentation is referred to as this.
• The goal is to guarantee that transactions are accurate and supported by sufficient evidence.
• Additionally, it verifies the authorization used to make an entry in the client's books.

Important PointsObjectives of vouching

1. Inspecting the books of original entries to ensure that transactions and entries are accurately recorded.
2. To ensure that transactions and entries have been correctly verified by a reasonable person.
3. Check that transactions have been categorized and disclosed in compliance with accounting principles.
4. Ensure that no fraudulent transactions are entered into the accounting records.
5. Ensuring that all entries and transactions are properly backed by evidence.

The correct answer is Responsible Official

Key Points

Voucher

• Every voucher should be signed by a Responsible officer to examine the authority of the document.
• Vouchers are those documents which are produced in support of business transactions. For example - bills, invoices, bank statement etc.
• The vouchers are verified for establishing the authority and authenticity of transactions recorded in the books of account.

Key Points

Vouching - Vouching is a part of an audit that aims to validate the transactions included in a company's book of accounts and is frequently referred to as "the backbone of auditing."

Important PointsSources of vouching are as follows - 

• Internal vouchers - The business itself has internal vouchers. Purchase orders that have been received or sales between departments are two instances of internal vouching.
• External vouchers - On the other hand, external vouchers are produced by other sources for the business. Bank statements and invoices produced by banks are examples of external vouching.

Carbon copies of cash memos, Wages book and Bin cards are internal evidence because prepared and maintained by business itself and can be provided to auditor any time they want. Bank statements obtained from the bankers is external documents because bankers are not employee of firm.

Thus, Bank statements obtained from the bankers is an example of external evidence obtained during vouching.

Key Points

Books of account - Ledgers, daybooks, cash books, account books, and other books fall under the category of "books of account," whether they are retained in written form or as printouts of data recorded on a floppy disc, tape, or any other type of electro-magnetic data storage device.

Important PointsVouching - 

• Vouching is a part of an audit that aims to validate the transactions included in a company's book of accounts and is frequently referred to as "the backbone of auditing." 
• Vouching makes ensuring that every entry in the books of accounts has the necessary supporting documentation, such as invoices, receipts, and other documents, in order to establish the accuracy of the recorded transactions. assisting auditors in confirming that all transactions in a company's book of accounts are related to business.

The objective of vouching are as follows - 

• To examine the accounting transactions recorded in the books of accounts by using documented evidence 
• To evaluate the reliability and adequacy of such documentary evidence
• To determine whether the transactions listed in the books of account are accurate
• To make certain that every transaction is accurately recorded in the books of accounts
• To ensure that all transactions and entries are backed by reliable evidence
• To guarantee that there are no fictitious transactions recorded in the books of accounts
• To ensure that all business-related transactions are accurately recorded in the books
• To ensure that each transaction has been duly validated by a trustworthy person.

Thus, the practice of verifying a transaction recorded in the books of account with the relevant documentary evidence is known as Vouching.

Additional Information

Posting - After the transactions are recorded in the journal, it is then posted in the principal book called as ‘Ledger’. Posting to the ledger is classifying phase of accounting.

Verification - Verification is a step in the auditing process where the auditor ascertains that the assets and liabilities listed in the Statement of Financial Position actually exist.

Ledger scrutiny - Ledger scrutiny is a complete account check. 

The correct answer is Option 1

Key Points

• Vouching is a procedure followed in the process of the audit to authorize the credibility of the entries entered in the books of accounts. ​

Important Points

• A Sales book is a record of all credit sales made by a business. It is required to be examined.
• A sales Invoice is a written document issued by a seller to inform the detail of the transaction to their customers. It is required to be examined
• A cut-off point means that transactions and events have been recorded in the correct accounting period.. Audit procedures are used to determine whether transactions have been recorded within the correct reporting period. It is required to be examined.
• The numerical sequence of source documents generated within the organization is required to be examined.​

The correct answer is (i), (ii), (iii), and (iv)

Key PointsVouching: Vouching is one of the activities of an auditor in process of auditing, in which an auditor checks each and every entry in the books of accounts and verifies it with the evidence available in the form of vouchers. Vouchers are nothing but cash memos, bills other documents that were issued or received at the time of the transaction for future reference. The process of Vouching is performed to check the authenticity of the transactions.

Important Points

• Payment in cash book: Wages and salaries are a type of payment for the business that is credited in the cashbook. In the process of Vouching of Wages and Salaries, examining the payments in Cashbook is required. 
• Payroll summary: The payroll summary is a detailed overview of the Payroll activity of the business. It consists of all the details like base salary, net pay, deductions allowed, etc. of the employees. Examining the Payroll summary is required for vouching salaries and wages.
• Examine Unclaimed wages: Unclaimed wages refer to the portion of wages for which work has already been done, but wages have not been claimed by the workers. These are kept in a separate account so that they can be paid whenever it is claimed by the workers. Auditors need to examine this account in event of vouching salaries and wages.
• Examine relevant salary registers: The salary register contains all the details of related to Employee Name, Department, Workdays, Break up of Earnings and Break up of Deductions, and the Net Pay payable to employees. This register keeps the complete record of all the salary-related data of the employees, so this must be verified at the time of vouching of Wages and Salaries.