Tracing vs. vouching

Tracing and vouching play a number of similar roles in auditing, but the key difference is the use of these auditing procedures to collect audit evidence.

Tracing meaning

Tracing helps to locate balance in the source documents. For instance, you are auditing at ABC Company; you notice that in the GL, there is a filing fee amounting to $240. To check the accuracy of $240, you will need to locate this number with the receipt from the filing department. So, this process of locating $240 to the source document is called Tracing. It helps in evaluating accuracy of the account balance.

Detailed explanation for tracing

Tracing is an approach used to find the credibility of accounting records. The sampling method is also used in the tracing technique. The reason for using the sampling method is that it is technically impossible to track and look into every transaction individually.

Tracing is considered a vital tool for affirming transactions as it inspects a transaction back from its source document. Tracing is frequently used to mark the completion assertion; however vouching assertion marks the existence/accuracy.

Example of tracing

Tracing’s example includes the typical use of the tracing procedure by auditors in an audit of revenue to test completeness. The procedure includes the following steps (example),

  1. A specimen (sample) of the sales invoice is selected.
  2. The amount in the invoice is traced back to the sales journal. It helps ensure the accuracy of the invoice.

While tracing, other procedures such as scanning the sequential number of the sales invoice and ensuring that there is no unrecorded sales help satisfy the completion assertion.

Vouching meaning

Vouching is the review of source documents by the auditor to ensure entries made in the books of accounts are correct and not misleading. The big five audit firms usually vouch with the following perspectives.

  1. Authorization/approval – Auditors assess if the transaction was authorized appropriately. In other words, appropriate approval was taken.
  2. Support/evidence – Auditors assess if a transaction was properly supported by source documents. For instance, if the audit client has proper requisition, invoice, delivery notes, and payment supports etc.
  3. Date of recording – It’s about cut-off testing. It helps auditors to assess if accounting transactions are classified in the correct accounting period/cut off.

So, vouching is a complete audit procedure to evaluate that accounting transactions in the accounting record are appropriately classified.

However, vouching or the direct verification approach is an expensive technique and can take a lot of time. In the vouching approach, specified areas of financial statements are not focused on; instead, a large number of account balances and transactions are considered. However, a representative sample is selected from the population to vouch.

Detailed explanation for vouching

Verification and authorization are two important components of the vouching procedure. After receiving financial statements, usually, the first step taken by auditors is to start vouching for the items of an income statement. Once vouching is done, receipts from customers, entries of cash sales, sales of fixed assets, and accounts receivable are taken into consideration.

This method makes it easy for the auditor to review all the entries and then look into the supporting documents to validate each transaction. Documents in reference to the recorded transactions in the books of accounts are found by the auditor such as receipts and capital expenses.

After vouching, the auditor certifies that the book of accounts kept by the business is in line with the law, and the company has not recorded entries against accounting concepts and provisions.

It enables an auditor to issue an audit report without qualification. However, before issuing audit report, auditors need to ensure they have covered the risk of material misstatement.

Difference between vouching and tracing

Vouching is the opposite of tracing where the source document is evaluated first. During vouching, source documents like invoice is taken and evaluated in terms of authorization, approval, and classification.

On the other hand, in tracing, understatements in transaction records are scrutinized. Vouching is considered more productive as it figures out all the financial statement assertions except for the completeness assertion.

In tracing, it is the opposite case; it only assists auditors while evaluating the reliability and completeness of financial statements. The initial step of vouching is to evaluate transaction value. It also helps in ensuring that the recorded transaction has supporting documents. However, auditors can cross-check the validity of an organization’s internal controls during tracing.

Tracing provides auditors the space to verify any false activity, error, or oversight at each step. So, if there is any suspicious transaction, it can be identified. On the other hand, errors or oversights in vouchers result in mistakes in their linked journal entries. Therefore, vouching helps auditors to collect audit evidence and verify multiple assertions.

Intents of vouching and tracing

Vouching and tracing, both mainly have the same objective which is to verify the internal controls of an institution and collect audit evidence. As stated earlier, tracing is a vital tool in completeness assertion, but it also assists auditors in inspecting understatements of transactions written down in journals or ledger books.

Vouching provides the structure of any auditing work in an organization. It validates the difference between revenue and capital accounts of all the transactions. It ensures that all the transactions recorded are accurate and doesnot carry material misstatement. The main purpose of using vouching in auditing is to bring accuracy to financial statements by looking at the evidence and supporting documents.

Also read, Importance of business understanding for auditors.

Types and sources of vouching

Generally, vouchers have two types i.e. primary and collateral. Availability of primary and authentic documents and bills is referred to as primary vouchers, for instance, cash memos, purchase bills, pay-in slips, etc. At the same time, identical copies of documents and bills are considered collateral vouchers, for example, a copy or duplicate of a sales invoice.

Sources of vouching are also divided into types, internal vouchers and external vouchers. Internal vouchers are prepared within the company, for example; a carbon copy of cash receipts and sales invoices. The vouchers prepared by any external source and not within the organization are called external vouchers for example bank statements, bank deposit slips, etc.

Also read, External audit guide


Vouching and tracing are considered essential techniques in auditing. Despite both serving the same purpose, the slight difference between them is that vouching assesses the accounting system and tracing assesses how comprehensive an accounting record is.

As vouching is considered a base of an accounting system, tracing provides a critical role in inspecting the completeness of that accounting system. The results provided by vouching and tracing are often the same; distinct approaches are used to start these audit procedures.

Frequently asked questions

What assertions are ensured by vouching and tracing?

Vouching helps to ensure assertions like accuracy, existence, rights, obligations, occurrence, and cut-off. It’s because auditors comprehensively review the documents regarding approval, authorization, and classification.

On the other hand, tracing is reconciling a transaction with the source document. For instance, you are looking at sales journal and want to locate sales transaction #0324 to the source document/original invoice. This locating of balance on the source document is called tracing. This procedure verifies the assertion of completeness. For instance, you have selected 40 samples to locate source documents/invoice. However, source documents exist only for the 30 transactions. Hence, the accounting record is not complete and there is compromise on internal controls of the business.

Please note tracing verifies the completeness of the accounting record.

Why is vouching an important procedure during an audit?

It’s because vouching helps to check/assess source documents. These documents are more reliable and the basis of the accounting system. Hence, vouching is considered to be an important audit procedure.

What is the difference between vouching and tracing?

Vouching is when you take the source documents like invoices and look at accounting. On the other hand, tracing is when you look at the accounting transaction and locate its source document.

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