Tools of Auditing: Working Papers Explained

Auditing is conducted for the Verification of assets and liabilities. There are various tools of auditing, such as Working papers, Audit evidence, Audit evidence, Audit program, Audit plan, and many more.  Audit working papers are used to record the data collected while conducting an audit. They endow with evidence that enough data was acquired by an auditor to aid his or her estimation regarding the core financial statements. 

Verification in auditing is conducted to ensure the authenticity of assets and liabilities. Working papers also procure evidence of whether an audit was appropriately planned and administered. They should have adequate information for an auditor who did not conduct an audit to determine the grounds for the opinion given concerning a customer's financial statements. 

Types of Certification That May Be Enclosed Within the Working Papers 

• Checklists of standard inspections stuff that were concluded and by whom

• The copies of correspondence

• Flowcharts of a user's main transaction processes

• Charts of organizations

• Questionnaires for which the customer gave answers.

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*It is a sample of a working paper audit.

Verification of Assets and Liabilities

The verification of assets and liabilities engages the consideration of the below-mentioned points-

1. That each asset or liability is correctly stated in the balance sheet.

2. That each asset or liability is correctly valued according to the generally accepted valuation norms.

3. That the assets exist on the date of the balance sheet and are the property of the institution.

4. That the assets are free from any charge except that is revealed on the balance sheet.

5. That no assets or liabilities on the date of the balance sheet have been mislaid.

Objects of Verification of Assets and Liabilities 

The Verification of assets and liabilities has two main objects:

1. The propriety of business is recorded.

2. Articulating an opinion on the financial statements, i.e., whether the balance sheet reproduces a true and fair view of the state of dealings of the company.

Verification in Auditing

Verification means the investigation of stuff appearing in financial statements, whether the stuff is as per the legislation or not. Verification of assets and liabilities are conducted to confirm the following −

• Existence

• Ownership

• Appropriate valuation

• Possession

• Freedom from nuisance

• Proper documentation

Objectives of Verification in Auditing

Following are the objectives of Verification in auditing –

• Authentication about the existence of stuff via physical verification.

• Legal and official documents concerning stuff are checked to confirm the ownership of stuff.

• To confirm that assets are free from any charge or lien.

• To get the evidence regarding the proper valuation of assets.

• Confirming that assets are properly accounted for in the books of accounts.

The verification of assets and liabilities in auditing notes is aforementioned.

Vouching

Vouching and Verification are considered to be similar, but there are lots of differences between Verification and vouching.

Vouching is proof of the accuracy and authenticity of accounting entries, as shown in the books of accounts, whereas Verification in auditing confirms the existence, possession, and estimation of assets, as shown in the balance sheet. The Auditor's duty is not only to vouch for the entries being shown in the books because vouching cannot confirm the existence of the related asset or liabilities at the balance sheet date.

The Importance of Vouching in Auditing is as Follows

• Vouching is the fundamental part of auditing

• Vouching is important to check the authenticity of the evidence.

• Vouching is the quintessence of auditing.

Difference Between Verification and Vouching

The following are the major difference between Verification and vouching

1. In vouching, vouchers are checked, which are in support of the accounting entry. Verification means to certify the resemblance of details concerning the assets or liabilities, with those shown in the Balance Sheet.

2. Vouching is conducted based on documentary evidence, i.e., vouchers, invoices, bills, or statements. On the other hand, deep analysis and documentary evidence are the elements of Verification.

3. In vouching, items of Income Statement are checked while Verification is done for Balance Sheet items.

4. Another point of difference between Verification and Vouching is that the former is conducted throughout the year, and the latter one is done at the end of the financial year.

5. Vouching for aims at checking the correctness, completeness, and authenticity of transactions. On the contrary, Verification emphasizes affirming the ownership, possession, valuation, and revelation of the assets and liabilities.

Hence it is obvious that there are lots of differences between Verification and Vouching.

Did You Know?

• Through medieval times, when manual book-keeping was rampant, auditors in Britain used to hear the accounts read out for them and confirmed that the institute's workers were not negligent or fraudulent. Moyer, in 1951 acknowledged that the most important duty of the auditor was to perceive fraud.

• The Central Auditing Commission of the Communist Party of the Soviet Union manoeuvred from 1921 to 1990.