There should be an effective system of Internal Check. Important parts of such systems should be (a)Persons maintaining the debtor’s ledger should not be allowed to collect the money from the customers, and (b) The customers should be asked to remit cash/cheques through the post.
The auditor should ensure that the unused receipt books are kept in the custody and control of some responsible officer. The original copies of all the spoilt receipt forms are attached with the duplicate copies in the receipt book. Proper scrutiny should be made about the discounts allowed to the customers. Special attention should be paid to amounts written off as bad debts. Tally the dates and amounts on the counterfoils with those in the cash book. Teeming and Lading should be avoided.
Vouching of Sale of Investment.
Sale of Investment should give rise to capital receipts, except in the case of sale by brokers or investment firms for whom the proceeds will constitute revenue receipts. Vouching of sale of investment should be done with the broker’s advice and comparison with the stock market quotations in the fin racial journal. It should also be checked with related to investments accounts. The securities on hand and the payments received thereon from time-to-tithe should be checked.
On verifying the receipt of the amount against the bill, the auditor should examine the bills receivable book, cash book and bank statements. e. He should enquire about the bills which have matured but the amount of which has not been received.
1. The auditor should match the interest received with the details of investments shown in the Investment Register. 2. Purchase of investment during the year should be verified and it should be ensured that the accounting treatment for ex-dividend, cum-dividend, ex-interest, cum-interest is correctly followed.
Errors and frauds arise mostly in connection with receipts and payments of cash by making misappropriations wherever possible. Hence the auditor should see whether all receipts have been recorded in cash book and no fictitious payment appears on the payment side of cash book.
Cash sales :- In vouching cash sales , cash register should be fully checked with carbon copies of cash memos . The auditor should verify the daily deposits of cash received in the bank. Dates of cash memos and date on which the receipts are recorded in cash book must be same.
Reading out. The voucher contents, including the organization's name, date, transaction amount, and several vouchers are read out to the senior auditor by the junior auditor.
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