Tracing Vs Vouching

“Tracing and vouching, if you learning financial auditing then they will absolutely look familiar right?”

Now, we all know that each and every business transaction occurred in the organization must be recorded in their accounting record where the accountant will make sure that all the raw data in source documents been transferred to related financial statement are shown with the same amount. For auditor, they will look it as evidence to test and see the existence and completeness of every transaction. Thus, this will show you the summary of both tracing and vouching are totally a different thing from another.

Source Documents

Financial Statement

          TRACING

                   

Tracing can know the act that we matching the source documents which contain the accounting transactions with the journal or ledger that contained the transaction. Reason to perform tracing is where when the auditor has concerns that the client has understated their liabilities or expenses. where in their balance sheet they might have material and liabilities understated and unrecorded expenses in their income statement. So, auditor will performing test by tracing up the transaction from the client’s supporting document to the financial statement to check the completeness of this particular transaction. In other word, the flow of tracing procedure would be from source documents up to financial statement.

VOUCHING

Vouching in other hand known as the act we selecting an item to test from accounting records (journal / ledger) first then only examine the supportive source documents. Reason to perform vouching is where when the auditor has concerns that the client has overstated their asset or revenue. Where in their balance sheet they might have overstated the assets and overstated their revenue in income statement. So, auditor will performing test by vouching down the transaction from the client’s financial statement to the supporting document to check the existence of this particular transaction. In other word, the flow of vouching procedure would be from financial statement down to source documents.