Purchase invoice vouching: a practical approach

Purchase invoice vouching means tracing a recorded purchase back to the supplier invoice and its supporting documents, to establish that the entry is genuine, authorised, correctly measured and in the right period. It is a directional test that runs from the books to the document, which makes it evidence of occurrence and not of completeness. Done properly it examines eight things on the face of the invoice and three things around it, and the record of what was checked has to survive without the person who checked it.

Vouching and verification are not the same test

Vouching examines a transaction against the documentary evidence behind it. Verification examines the existence, ownership and valuation of a balance. Purchases are vouched; the closing payables balance and the stock it produced are verified. Files that blur the two typically end up with a well-vouched purchase section and no work at all on the liability that the same purchases created.

The direction of the test is what determines what it can prove. Starting from the ledger and finding the invoice shows that what was recorded happened. It cannot show that everything which happened was recorded, because an unrecorded purchase has no ledger entry to start from. That requires the reverse test, from the goods inward records and supplier statements into the books.

What to examine, in order

The order matters because the early checks are the ones that make the later ones pointless if they fail. Establish that the document is the right document before recomputing what is on it.

1. 01Is this a tax invoice addressed to the clientThe entity name and, where GST applies, the GSTIN on the invoice must be the client's own registration for the state in which the credit was taken. A multi-state client billed at the wrong registration is a genuine and common problem, and it is invisible if you only check the name.
2. 02Is it an invoice at allProforma invoices, quotations, delivery challans and account statements routinely find their way into a voucher file. A proforma is not evidence of a purchase and carries no input credit.
3. 03Does the period stated match the period recordedCompare invoice date, the date of receipt of goods or services, and the voucher date in the books. Where they straddle the year end, stop and apply the cut-off procedure instead of the routine one.
4. 04Recompute the arithmeticQuantity times rate, less discount, plus freight and other charges, plus tax at the stated rate, equals the invoice total. Recompute it rather than reading the total. Rounding, a discount applied after tax instead of before, and a rate applied to the wrong base are all found this way.
5. 05Agree the amount and the split to the ledger postingThe taxable value should reach the expense or asset ledger and the tax should reach the input credit ledger. A single posting of the gross amount to the expense account means credit was not taken or was taken elsewhere, and both are worth knowing.
6. 06Agree to evidence of receiptGoods receipt note, gate inward entry, signed delivery challan or a stock ledger movement for goods. For services, a certified completion note, a timesheet, a milestone certificate or a report. Establish what the client actually produces before the season starts, and agree what you will accept.
7. 07Agree to the order or contractRate, quantity and terms against the purchase order, work order or rate contract. Where none exists, identify who authorised the purchase and confirm their authority against the client's own delegation.
8. 08Check the classificationThe ledger allocated should match the nature of the item. Pay attention to anything that could be an asset: repairs that are actually a replacement, software licences, tooling, and improvements to leased premises.

Three checks sit around the invoice rather than on it: whether the supplier is a related party, whether the credit taken is of a kind blocked under section 17(5) of the CGST Act, and whether the invoice appears in the input credit available per GSTR-2B for the relevant period. The third is normally handled in the input credit reconciliation rather than item by item, but a vouching test that ignores it entirely will raise exceptions the reconciliation has already explained.

Tickmarks worth using

A tickmark legend is not a formality. It is what makes a vouching schedule reperformable by someone who was not there. A legend of four or five marks, each meaning exactly one check, beats a single tick that means the item was looked at.

Recording the test so it survives review

A vouching schedule should carry, for every selected item, enough identifying detail to find the document again: vendor, invoice number, invoice date, amount, voucher number, and where the document is held. If the client provided a scanned file, record the file name. A reviewer who wants to reperform one line should be able to do it without asking anyone a question.

Record the items that passed as well as the ones that did not. A schedule showing only exceptions gives no evidence of the extent of the work, and extent is one of the four things SA 230 requires the documentation to make clear.

What goes wrong most often

Where the hours actually go

On a purchase section of any size, most of the time is spent on three activities: finding the document that corresponds to a ledger line, agreeing four or five fields between two documents, and recomputing arithmetic. All three are mechanical. The judgement is concentrated in a small number of decisions, and those decisions are the part that has to be written down in the auditor's own words.