Rangarajan (CA Student) (200 Points)
09 June 2008Hi every one
How will you find a ommission of a bill from entering the accounts when you do not have or seen the bill?
That is the bill is ommitted from accounting because of unintentional misplacement of the bill by the accounts department. The accounts department is not aware of the ommission.
How will an auditor will find the above query while vouching or general ledger scrutiny?
guru santhanam
(Chartered Accountant)
(97 Points)
Replied 10 June 2008
Dear Rangarajan,
Auditor can identify such transactions in the general ledger where payment is made to vendor with no corresponding entry for debiting expense due to non-availability of bills.
During vouching, may be the internal journal entry or purchase voucher alone would be there without the supporting bills.
Solution to the problem:-
1. Materiality of the transaction to be noted.
2. If amount involved is greater, Auditor can insist for duplicate bills.
3. If the Vendor is regular and if many transactions for more or less same amount is done, auditor can confirm the validity of the transaction by the payment made to Vendor. (With corresponding verification in Bank A/c Statement or Properly authorized Cash Voucher )
(Provided the vendor has stopped supplying thereafter) (If he is regular and continuing, then we can insist for duplicate bills or statement from vendor)
4. Management can give a representation if the amount involved is significant in the balance sheet & profit / loss Account point of view and no duplicate bills could not be availed.
Hope this helps u
Regards,
gurusanthanam
Rangarajan
(CA Student)
(200 Points)
Replied 10 June 2008
Dear Mr.Gurusanthanam
Thanks for your opinion. It was very useful to me.
But your comments are on the grounds that the payment is made for the missing bill.
In this case that the missing bill is not accounted and payment is also not made. This type of error may not be found in the gl srcutiny.
An auditor will not find this case during vouching because the bill has not been accounted and hence the internal journal or purchase voucher would have not been raised.
Your Solution provided helps me to deal with the problem after identification of the mistake. The main question was how due you identify the mistake, that a bill has not been accounted and payment for which has not been made?
Thanks for showing interest in helping me out
Hope to see your reply soon
Regards
Rangarajan
There are two possibilities
1. Either the bill is paid in cash
2. or the bill is paid by cheque.
If the bill is paid in cash then there will be a difference in balance as per book and cash balance. Hence the ommission will be found out
If the bill is paid by cheque, as the bill is omitted and not accounted, there will be a debit balance outstanding to the supplier's account to the extent of the bill amount. And hence the omission will be found out.
If the entity is maintaining stock accounts then stock accounts will be another avenue to find out the omission. Hope this suffices the querry
Vishwanath Achari
(CA )
(35 Points)
Replied 10 June 2008
Hai Rangarajan,
If the entries are found in the Accounting Software better take a hard copy of the entries as per the software and cross verify with the respective vouchers available in the files and when you do this those vouchers which are not entered in the software will be filtered and also this helps to know the entries which are wrongly entered in the software
no doubt it is bit time consuming job but it gives greater control over the entries made and the available source documents
Rangarajan
(CA Student)
(200 Points)
Replied 10 June 2008
Hai Mr. Vinayak
Thanks for your comments but certains points are to be noted.
The bill is not accounted and payment is also not made. Therefore Cash and Bank Balance will have no problem.
Since payment is not made the party account will tally.
Difference in stock will be useful in identifying the omission if it is purchases. If it is other expenses, there is no stock register to verify.
Regards
Rangarajan
Rangarajan
(CA Student)
(200 Points)
Replied 10 June 2008
Hai Mr. Vishwanath
Thanks for your comments. There are points to be noted
I am putting forth a question that an entry was omitted and the source document is lost. There is no source document available to the person doing vouching. That is the person vouching will have no clue in identifying a missing journal or purchases for expenses.
Now in such a case, how do i identify the error?
Regards
Rangarajan
sagar
(CA Final)
(379 Points)
Replied 07 July 2008
I studied your question and the replies sent to you. In simple terms you can not find the mistake if ommission is there. But year end, if you insist the account statement of the parties,(major) then it will come to notice while cross veryfying. You have put a nice question
CA Nikhil Mittal
(Manager (Audit))
(77 Points)
Replied 08 July 2008
Hi Rangarajan,
Nice Question
The answer is very much simple.
If a bill is ommitted for accounting & payment has also not been made than auditor can't do anything since there is no debit & credit effects. But still we can tackle the arrear, when we demands the confirmation from the creditors along with copy of account of client's ledger in thier book. Oviously, balance in our book & balance in creditors book must not tally.
2. Now, you can also raise another question that if this will happen in the case of a new creditor & during the year, only one transaction will take place (Which is ommitted) then what can auditor do? If this type of situation takes place then it can only identified during audit of subsequent year. For the current year auditor can only demands management repersentation.
Hope this reply will helpful for you
See you again
Vinayak
(Vat Consultant)
(22 Points)
Replied 22 May 2009
Dear Rangarajan
Under the circumstances given by you, i.e. when the bill is not paid, the creditor will come running asking for the payment. So the circumstances seem improbable. If you want to verify the case suo motu then you will have to reconcile all the creditors accounts based upon the statements from the creditors. This involves a lot of effort and follow up. Hence you can undertake such a course if you know the materiality of the transaction.
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