Journals:
Journal is basically used for recording, opening, adjusting and closing entries and also those transactions which could not be recorded in any other book of original entry. The evidence to vouch the entries would be in the form of vouchers, correspondence, contracts, minutes etc.
There are Following journal entries could be vouched.
1. Opening entries:
These should be checked with reference to previous years audit working papers or audited balance sheet.
2. Closing entries:
These should be checked with reference to the audited closing balances of the general ledger.
3. Transfer entries:
Authority should be seen for the transfer from one ledger account to another ledger account. The auditor must see that direct transfer from one, account to another account is not made.
4. Adjusting entries:
The auditor should see that all outstanding liabilities in respect of expenses relating to period under audit, income received in advance and income corned and not received are fully made. Adjustments in respect of expenses prepaid should also be closely scrutinized.
5. Rectification entries:
The details of actual mistakes should be scrutinized and transactions must be thoroughly checked with reference to the available evidence. The necessary entries must be authorized by a responsible official.
6. Transactions for which there is no other book of original entry:
Reference must be made to correspondence, minutes of board/ shareholders and other relevant documentary evidence to vouch the transaction for which there is no other book of prime entry e.g. bad debts, bills dishonors, acquisition of different assets and liabilities taken over.
7. Casts & postings:
The auditor also checks the casts of the journal vouchers and journal entries and then the pasting to the respective ledger accounts should be checked.
Vouching of trial balance:
The statement of balance extracted from ledger accounts is called trial balance. The trial balance object is to see the arithmetical accuracy of the transaction and to check the comprehensive balance of the accounts ledgers. The auditor should check the following things in the trail balance.
1. Checking of trial balance:
In the trail balance the both sides are check that is equal or not.
2. Accuracy of balance:
Examine that all balance have been accurately recorded in the trial balance.
3. Proper head:
Verify that the entire amount has been recorded in its proper head.
4. Inclusion of adjusting entries:
Check that all the adjusting entries have been properly included in it.
5. Transfer of balance to ledger:
Verify that all the balances of ledger accounts have been transferred.
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