Vouching is a direction of substantive testing. The auditor starts from an item already recorded in the client’s books, a journal entry, a ledger line, an item on a detailed listing, then inspects the documentation supporting it to test whether what was recorded is real. The recorded item comes first and the document second, and that order is the whole of the definition.
Further audit procedures split into tests of controls and substantive procedures, and the substantive half takes in tests of details and substantive analytical procedures (PCAOB, AS 1105, Audit Evidence, .13). Vouching names a direction a test of details can run in, rather than a procedure the standards list under that name. The control half asks a different question, worked through in tests of controls.
Vouching and Tracing, Separated by Direction
Run the test the other way and it answers the opposite question. Vouching starts in the books and ends at the document, testing whether what was recorded actually happened. Tracing starts at the document and ends in the books, testing whether everything real was recorded at all.
Neither word carries a definition in the AU-C sections that hold generally accepted auditing standards, GAAS, and that is worth knowing before a workpaper leans on one. Vouching does not appear there at all. Tracing does, and not as the mirror of vouching: the test count example at AU-C 501, Audit Evidence, Specific Considerations for Selected Items, .A27, describes tracing items selected from management’s count records to the physical inventory and tracing items selected from the physical inventory to management’s count records, both directions under the one word.
What the standards do name is the act itself. Inspection involves examining information, whether internal or external, in paper form, electronic form or other media, or physically examining an asset (PCAOB, AS 1105, .15). Vouching and tracing are how practitioners say which way they pointed that inspection.
The Assertions Each Direction Supports
Assertions about classes of transactions and events include occurrence, meaning transactions and events that have been recorded or disclosed have occurred and pertain to the entity, and completeness, meaning all transactions and events that should have been recorded have been recorded (AU-C 315, .A219). A vouched transaction speaks to occurrence, and a traced document speaks to completeness. The document behind a vouched transaction also carries an amount and a date, so it bears on two more assertions in the same list: accuracy, meaning amounts and other data relating to recorded transactions and events have been recorded appropriately, and cutoff, meaning transactions and events have been recorded in the correct accounting period.
Whether vouching speaks to existence instead depends on what was selected. Existence is an assertion about account balances under GAAS, that assets, liabilities and equity interests exist (AU-C 315, .A219), so an item pulled from a balance listing and vouched to its documentation speaks to existence, while a recorded transaction vouched to its documentation speaks to occurrence. The categories are not rigid even there: the auditor may express them differently, or combine the transaction assertions with the balance assertions, provided every aspect described in that paragraph is covered (.A218). Audits of issuers work from a single combined category, existence or occurrence, covering both assets or liabilities existing at a given date and recorded transactions having occurred during a given period (PCAOB, AS 1105, .11).
Where Vouching Lands in the Workpapers
A tested sample is not documented by writing down that it was vouched. In documenting the nature, timing and extent of the audit procedures performed, the auditor should record the identifying characteristics of the specific items or matters tested (AU-C 230, Audit Documentation, .09a). The application material shows the shape: for a detailed test of entity-generated purchase orders, the auditor may identify the documents selected for testing by their dates and unique purchase order numbers (.A14).
That identifier is the same one that makes a client’s audit trail navigable in the first place. A ledger carrying invoice numbers is quick to vouch, and one without them turns every selection into a hunt through a filing cabinet.
Two decisions sit upstream of the procedure and do not move with it. How much gets vouched follows from the amounts set in materiality in auditing. Which items get selected, and how many, stays with the auditor even when someone else performs the work, a line drawn in outsourced audit support.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms on accounting and tax work rather than audit fieldwork, and a firm can grade that work on its own files through a trial task.
