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Microlesson · 5-min read

Vouching Other Expenses – Attributes for Verification

## Vouching Other Expenses: Attributes for Verification

Beyond purchases and payroll, entities incur various other expenses: rent, power and fuel, repairs and maintenance, insurance, travelling, miscellaneous costs, etc. The auditor vouches these expenses to verify specific attributes.

### The Six Attributes of Vouching Other Expenses

When vouching a sample of other expenses, the auditor verifies all six of the following:

#AttributeWhat the Auditor Checks
1PeriodDoes the expenditure belong to the current period under audit? (Prepaid? Prior period?)
2Capital vs RevenueIs it revenue expenditure (not capital)? (Has any expense been incorrectly capitalised?)
3Supporting DocumentationIs there a valid supporting document? (Invoice, travel ticket, insurance policy, etc.)
4ClassificationIs the expense recorded under the correct expense head?
5AuthorisationWas the expense authorised per the Delegation of Authority (DoA) matrix?
6Business PurposeIs the expense related to the entity's business and not a personal expense?

### Analytical Approach

For certain recurring expenses (rent, power and fuel), the auditor may also perform trend analysis — comparing monthly patterns to identify:

  • Unusual spikes (suggest irregular or fictitious expenses)
  • Missing months (suggest possible omission)
  • Unexpected drops (suggest possible capitalisation of revenue items)

### Mnemonic: P-C-S-C-A-B

Period | Capital or Revenue | Supporting doc | Classification | Authorisation | Business purpose

Worked example

### Example 1

Q: During audit of Future Ltd. (manufacturing), CA Revathi picks a sample of repair expense vouchers totalling ₹3.5 lakhs. One repair bill of ₹80,000 was for the director's personal vehicle. Another ₹1.2 lakh repair was for a machine overhaul that extended its useful life significantly. What are the audit concerns?

A: Two issues: (1) The ₹80,000 personal vehicle repair fails the 'business purpose' attribute — it is a personal expense incorrectly charged to the entity. It should be reversed and either treated as a Director's loan or disallowed as a business expense. (2) The ₹1.2 lakh machine overhaul that extends useful life likely qualifies as capital expenditure (not revenue), failing the 'capital vs revenue' attribute. If it extends the machine's useful life or increases its capacity, it should be capitalised and depreciated, not expensed in the current year.

⚠️ Common exam mistakes

  • Only checking for supporting documents without verifying all six attributes — incomplete vouching
  • Forgetting to check 'period' — prepaid expenses charged fully to current year, or prior period expenses sneaked in
  • Missing the personal vs business expense test — expenses benefiting promoters/directors charged to company
  • Confusing capital and revenue: repairs that extend useful life or increase capacity = capital; routine maintenance = revenue
Reference:
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