How will you vouch and verify the followings?
a) Bills Receivables (2 Marks June 2008)
b) Traveling Expenses (4 Marks June 2008)
c) Salary and Wages
Obtain the schedule of bills receivables and ensure that the total agrees with the balance in bills receivable account (control account),
Check the unpaid bills at year to ensure that bills receivable are correctly accounted for,
Check the cash collections in respect of bills matured for payment before the balance sheet to ensure that accounts are correctly presented,
If any bills are dishonored or are not accepted the client after the balance sheet date or any portion of the bills is unrecoverable then the auditor should ensure that the required provision has been made in the year end accounts,
Where a new bill is reported to have been taken in lieu of a bill which has matured, the bill should be inspected,
Where a number of bills are found to have been discounted before the close of the year, the auditor should ensure the amount of bills so discounted is shown as contingent liability
Examine the traveling policy of the company. In most cases employees service rules/administrative rules have a chapter on traveling staffs.
Examine the approval process of travel orders i.e. how the travel orders are approved and who approves the order
Establish whether the fixed rates of traveling allowances are paid or traveling expenses are reimbursed as per actual bills
Examine the approval process of travel bills/vouchers i.e. who approves the travel bills
Ensure that travel bills/vouchers include approved travel orders with following details and documents
Name and designation of the person claiming the amount
— Particular of journey taken
— Original Air ticket (passenger copy)/Bus Ticket/Railway Ticket
— If the lodging and food and any other expenses are on actual reimbursement basis , all relevant bills in original
Check the calculation of travel bills payment in case of fixed traveling allowance and ensure that days are correctly calculated. Any traveling advances taken should be deducted against the travel bills.
The auditor may carry out the following procedures for the vouching and verification of Salaries and wages. The records can be examined on sample basis based on the effectiveness of internal control.
i) Examine the payroll/wage sheets with employees‟ time /attendance record, leave records and ensure that the payrolls are approved the competent authority.
ii) Verify the following deductions:
Leave without pay
Loans and advances
Fines and Penalties
Welfare schemes/Health schemes/Insurance Charges
Voluntary contribution to retirement benefits
iii) Examine the legal, regulatory and contractual agreements and confirm their compliances
iv) In case of casual labour, examine approval of competent authority. The auditor can also pay surprise visits to assess the correctness of attendance.
v) In case of outsourcing of labour, examine the contract with the suppliers
vi) Test the correctness of the amount with reference to the Annual Return of the salaries submitted to Income Tax Authority
vii) Obtain the list of employees who have retired during the year and verify that they have not been included in the payroll
viii) Confirm that unpaid or unclaimed salaries and wages are correctly accounted for. Check the subsequent payments
ix) Compare the following records with those of previous year in order to assess the variation and to obtain the required assurance
Total Wage Bill,
Monthly wages and salaries
Salaries and wages for each department
Ratio of salaries and wages to cost of sales/cost of production
Ratio of P.F/other Contributions (based on fixed percentage) to total salaries and wages