AUDITING

(PART-11)
(UNIT-II)
ROUTINE CHECKING AND TEST CHECKING
(PART-4)

1. INTRODUCTION
Hello students I welcome you on the lecture series auditing and under
auditing today we shall be taking up unit II and under unit II we are
going to discuss a very preliminary topic which is very beneficial to the
students who first time go for an audit. So today we are discussing
about routine checking and test checking. Routine checking and test
checking are part of the audit process while conducting a audit we
need to go for routine checking and test checking so that the detail
vouching of each and every item can be done. So let us understand it
in a separate unit and under separate discussion is been taken up
under routine checking and test checking so that we can discuss in
length about the following features. The meaning features advantages
disadvantages of routine checking and test checking when we will do
the difference between routine checks and test checks.

2. ROUTINE CHECKING
So first of all let us understand the meaning of routine checking.
Routine checking means checking of arithmetical accuracy of books of
original entry the ledgers with a view to detect clerical errors and
frauds of a very simple nature so first time when a candidate goes for
doing the auditing he has to go for checking the routine checking so
first step to be followed is to check the arithmetical accuracy of the
data being entered so whatever data input has been done we need to
ensure whether the totals are being matching up the debit sides and
credit side are being tallied there is no difference in the ledger posting
which is being done for the books of original entry so this is a very
simple exercise but yet with lot of detail analysis and meticulationsuch
routine checking is to be done.

So what are the features of the routine checking, detailed checking

because we need to do the routine checking of each and every
transaction which is being recorded under books of original entry and
now it is being posted to the ledger then it’s a traditional system
because a very preliminary check is to be done as to the arithmetical
accuracy of the data which is being done as a input so right now under
today’s scenario where lot of methods and data processing systems are
being evolved there is lesser need of routine checking as most of the
data’s are been computerise yet the mistakes cannot be mitigated to a
large extend although we have taken care not to make the mistakes of
clerical nature or of arithmetical inaccuracy so this system was being
followed when there was not so much of the computerised date yet
with the computerised data its importance has not gone down again
the routine checking has to be done but now there are inbuilt sheets of
control checks while performing the audits under the computerised
system. Next one is checking of each and every system. Off course
when we do the routine checking the routine checking are to be done
for sales for purchases and for assets and liabilities this is a method of
extensive checking it’s a expensive task because lot of time is being
spent on doing the routine checking the clerical staff is being
appointed and dedicatedly they have to carry out the routine checking
on very regular basis when its main aim is to detect the clerical errors
and frauds of very ordinary nature.

3. ADVANTAGE AND DISADVANTAGE

What are the advantage of going for the routine checking thorough
checking of transactions can be done so that there cannot be a chance
of any fraud there cannot be duplicacy of the data if a data is being
entered twice whether intentionally or unintentionally it can be
detected there can be lesser chances of doing any mis-statement of
the information when thorough checking of transaction is being done
while following the routine checking. It constitutes important base
because it is being known to the organization that routine checking’s
will be done they will be much particular about the fact that clerical
errors or the errors manager of fraud should not be done. It facilitates
the verification of arithmetical accuracy of transections and it’s very
easy to perform.

Now what are the disadvantages of doing the routine checking?

First one is it is a mechanical process because it is very monotonous
and regularly and on a daily basis arithmetical accuracy of the
transaction are to be done it is repetitive in nature. Complex errors
and fraud remain undiscovered so again when the substantive test are
being implemented on a larger scale and in an extensive manner such
complex errors and frauds can be determined but in the routine
checking only ordinary errors can be traced out. It is expensive
because its time consuming the labour is being employed to do routine
checking and its tends to be boring because every time we have to find
out the same sort of errors we have to do the calculation aspect so
that the debit and credit side may not be mismatched there cannot be
any omission or duplication of the data so in a way it tends to be
repetitive so it amounts to a certain level of boredom for the staff who
is doing it on a regular basis. Of course there is a method of reducing
the boredom under this work there on a circular basis or on a
rotational basis staff can be changed then redundent in certain cases.

What’s difference between routine checking and test checking let us

understand it. Under routine checking we need to verify each and
every book of accounts, while test checking is the examination of
selected number of items it is not that elaborative as that of routine
checking. Under routine checking, check transection verification
without exception that means entire transaction which are being
recorded in the original books of accounts and subsidiary books are to
be checked without any deficiency or without leaving anything out
while under test checking it avoids immaterial items only significant
items or material items are being examine under test checking.

Routine checking is done on a daily basis while test checking can be

done on a weekly, monthly or quarterly basis depending upon the size
of an organization and quantum of transaction which need to be
analysed and examined.

4. VOUCHING
Now again one of the feature of the routine checking and test checking
is vouching, now let us understand what do we mean by vouching and
now it to be carried out, why it is helpful under the routine checking.
Vouching is the process of inspecting documents that supports a
recorded transaction in order to verify the authority and authenticity
of such a transaction. So when vouching is been done we have
underlined document with us with which the transaction which is being
recorded in the books of the account can be verified so when vouching
is to be done each and every aspect of the transaction is being
analysed because we need to verify the authority as well as the
authenticity of the transaction so when a transaction is being verified
with a voucher the date, the amount, the party concerned all such
features are to be taken care of while doing the vouching.

Vouching has been defined by various accounting scholar’s according to

J R Batliboi vouching means testing the truth of item appearing in the
books of original entry. So here again he wants to say that where the
truth of an item is to be analysed or it is to be tested the underline
document that is voucher is to be taken care of.

Secondly by Lawrence R. Dixy it has been described as vouching is an

act of comparing entries in the books of accounts with the
documentary evidence in support thereof. So it’s a very vivid and clear
definition of vouching where it has been specifically mentioned that
documentary evidences are been taken in support to authenticate the
entry which is being recorded in the books of original entry.

So what are the objectives of carrying out the vouching so that we can
do the complete routine checking’s. Firstly verification of authority
and authenticity of transaction recorded in the books of the account
which we have discussed right now that it can be done when a voucher
is been analysed and the truth of the entry can be examined or tested
with such voucher. To ascertain that the record transection are
genuinely connected with the business where there is a underline
document and it is not in the name of business entity so we can say
that a fake document is being given and the truthness of the
transaction which is being recorded in the books of account is
questionable. So it is a peculiar feature that the voucher which we are
having with us should be in the name of business it should be
associated or connected with the business for which the accounting
entry is being recorded in the books of account thirdly to ascertain
that the recorded transaction are supported by documentary evidence
called voucher. We have already discussed so many times out here that
voucher is the documentary evidenced which supports the journal
entry which recorded in the books of accounts and to ensure that all
vouchers pertain to financial year under audit that means if our
financial year is from April 1 to 31 March the vouchers should also be
for the same financial year there should not be voucher which belongs
to previous year or a succeeding year the relevant voucher should be
there in support of the journal entry which we have passed in our
books of account and cut of procedures can be employed so that such
entries or such vouching can be done and the inappropriate data entry
can be eliminated so that correct financial position can be traced out.

Now there is certain procedure to be followed when we do the

vouching first of all call out particulars that means we need to take up
relevant vouchers for sales, for purchases and all the underlined
documents are been asked to be given then we compare the details,
while comparing the details we should give weightage to the date, the
particular, the voucher name that means in who’s name the voucher is
being appearing whether it is relevant for the business, then the
transaction is related to the business it should not be of personal
nature the amount which is being reflected in the voucher should
exactly be same which is recorded in the books of accounts and if
there is any text it should be properly accounted for with the help of
proper accounting entry. Then put initials, put initials means that we
are authenticating by transection, authority will do the signature for
authorised signatory that particular transection is genuine and cancel
the documents which are being cancelled or where a transaction has
not taken up a proper shape these all parameters are to be evaluated
while doing the vouching.

5. ROUTINE CHECKING AND VOUCHING

Now let us examine the differences between routing checking and
vouching because we have discussed in length about both the things
vouching as well as routine checks so let us make a difference between
the two so that both the concept can be clear to us routine checking
comprises of checking of accounts ledger posting etc. that means
totalling, sub totalling, casting and posting to the correct account or
not all this will be done under routine checking whether there is under
casting, overcasting we all will look after it under routine checking
while watching is the checking of the transaction, here the
authenticity and authority of the transaction is been examined rather
than the arithmetical accuracy the objective of routine checking is to
verify the accounts have been correctly balanced that means debit
side and credit side are matching up they are properly been posted
there should not be any error as to the recording of the transaction as
well as posting of the transaction as well as the classification of the
transaction while the object of vouching is to vouch the transaction on
documentary evidence. Routine checking is included in vouching;
vouching is broader term as it includes routine checking so while doing
the watching routine checking will be carried out because when a
transaction is being examined both the amount as well as the
authenticity of the transaction is been taken care of but under routine
checking only arithmetical accuracy is being done however vouching is
been included so that the amount can be matched up and it is proper
or not, both are complementary to each other but vouching is again a
larger or bigger accounting or auditing procedure where the techniques
of doing the routine checking can be applied.

Voucher we have already discussed that it’s a documentary evidence in

support of an transaction so there can be various sort of vouchers like
purchase vouchers, sales vouchers, sales return notes, purchase return
notes and they should be compiled in the separate folder so that we
can have the bunch of all the vouchers at a place where the routine
checking is being carried out.

Now there are two types of vouches primary voucher and collateral
voucher, primary voucher are those vouches where written evidences
available in original it is known as primary voucher, while collateral
voucher means when a written evidence is not available in original but
it is available in copies it is known as collateral voucher.

6. TEST CHECKING
Now let us understand another important feature of our discussion that
is test checking, test checking is an accepted audit procedure wherein
an audit is conducted on the basis of part checking. We are not going
for a complete checking but part checking is being done for example
there are a bulk of sales transaction so we will take up certain
transaction of certain suitable basis and partly we will do the checking
of such items in detail. In adopting this technique the auditor must
take care to see the proportion of the transaction tested to the total
number of transaction is reasonable so here we want to say that where
there are number of transactions we can go for test checking but the
test checking should not be so small that we cannot derive any
information of it. If out of hundred transactions we are going to vouch
only 50% of the transaction then we should setup a limit that each of
these bundles last 25 or first 25 transaction would be verified
randomly and they would be verified in the detail. So under test
checking what we are doing is that we are not totally secluded the
entire range of the accounting data’s but we are doing it in a partial
manner. Only on the basis of a reasonable base we are doing the test
checks. Test checks cannot be carried out in the case of size of the
entity is very small and or there is no effective internal control system
so we have two important things are there if the size of the
organization is so small that there are only limited number of
transaction there is no use of going for the test checking entire routine
checking is to be done as well as vouching is to done and one more
feature is there that if organization might be medium term
organization or a large one but if the internal control systems are week
and there are lot many errors in the transactions which we have
noticed under that case it is advisable not to go for the part checking
or to go for a detailed procedure of auditing here we are going to
extend the audit checking we will avoid the test checks where internal
control systems are week.

7. METHODS OF STATISTICAL SAMPLING

Now students we will understand methods of statistical sampling
because when we go for the test checks sampling is the method which
we are going to use so under partial check as per SA 530 the revised
one audit sampling. The auditor should select sample item in such a
way the sample can be expected to represent the population. So
wherever the part checking is being done and we are taking the help of
audit sampling under that case we are required to that sample which
will give us the scenario of the entire population so first of all we will
go for a judgemental sampling. Under this method the sample size and
the composition are determined by the personal experience and
knowledge of the auditor. The expected degree of objective cannot be
assured as the risk of personal bias cannot be eliminated so in the way
it is neither objective nor scientific to go for the judgemental sampling
because if the auditor is not that much experienced he may not select
the appropriate sample and as such the population as whole cannot be
evaluated on the basis of such sampling. One of the important
concepts is the statistical sampling it involves mathematical laws of
probability in determining the appropriate sample size. So here the
exercise being done in order to evaluate the proper sample size where
testing can be done properly so that we can ensure the population for
which the sampling is being done is giving us the correct picture of the
total amount of the transaction which we are checking so such method
is more scientific and judgemetal sampling is not that useful. It is
widely use where a population is to be tested consist of large number
of such transaction which need to be evaluated on the basis of
sampling.

8. SUMMARY
Now students we are summing up our lecture of today under today’s
lecture we have learnt in detail about the routine checking and test
checking. We have also learnt that how routing checking varies with
test checking as well as vouching. As we know that routine checking is
the arithmetical calculation or the checking of the arithmetical
accuracy of the transaction which are being recorded for the books of
original entries to the ledgers and we take the help of supporting
documents known as voucher to do the vouching where the
authenticity and authority of the transaction is being recorded with
the help of documentary evidence and they are being known as the
vouching. So vouching is different from routine checking as vouching
involves the routine checking. Then we have discussed about test
checking where rather than checking entire population we have taken
up the sample which will represent all the characteristics of the
population and the test checks can be carried out. So where the part
checking is necessary depending upon the large size of the transactions
we can go for judgemental sampling or the statistical sampling. With
this we are ending up our lecture of today based on routing checking
and test checking.

Thank you.