In your company, are all transactions recorded in full? To ensure this completeness, the company can conduct a tracing audit of transaction evidence or supporting documents, journals, ledgers, and financial statements.
Tracing procedures in audits not only ensure completeness, but also the suitability of source documents to the reliability of the company's recording system. This analysis allows the company to have a comprehensive record of transactions or finances.
What Is A Tracing Audit?
Tracing audit is a transaction check that starts from supporting documents and is matched with accounting records. For example, matching transactions on a road letter or goods request form with notes in a purchase Journal.
Tracing audit is one of the important audit procedures carried out on the company's financial statements. This procedure can ensure the completeness of the record of all transactions in the financial statements and ensure that transactions actually occur.
Tracing function in Audit
- Testing the completeness of recording - transaction recording nothing is missed.
- Detect transactions that are not logged - such as hidden income, debts are not recorded, and manipulation of financial statements.
- Prevent understatement - prevent the existence of reported revenues smaller than reality and unrecognized liabilities and expenses.
- Assess the effectiveness of internal control - less effective internal control can occur due to weak SOP recording, separation of duties is not running, and the accounting system is not reliable.
- Support Report reliability – tracing ensure financial statements are presented complete and do not mislead users of the report.
Process and how to perform audit Tracing
In general, the audit tracing procedure can be divided into three stages as follows.
1. Identify Transaction Source Documents
First, the auditor identifies the source document of the transaction to be audited. A transaction source document is the document that first records a particular transaction. For example, sales and purchase invoices, proof of cash receipt, proof of payment, road letter or proof of handover, and contracts or agreements.
At this stage, the auditor selects a sample of documents, checks, and ensures that the documents are original and valid. If there are several types of transactions, each document is grouped by the type of transaction. This stage ensures that the transaction being traced actually took place, not fictitious.
2. Browse source documents to journals and ledgers
Once the source documents are confirmed to be valid, the auditor searches the accounting records that the company has. Such as General Journals, special, or general books.
At this stage, the auditor ensures that the recording date matches the transaction period, the account used is correct, and the nominal recorded is the same as the source document. The purpose of this stage is to complete the recording of transactions and there are no missed or pending transactions.
3. Ensure transactions are recorded in the Financial Statements
The last step is to ensure that all transactions in the general ledger are recorded in the financial statements. At this stage, auditors examine transactions in ledgers, trial balances, and financial statements.
This stage is the last stage to ensure that the financial statements are written in full and can be accounted for.
Examples of tracking in audits
For example, the following is a case study tracing the audit of the purchase transaction of PT ASD's corporate computer equipment in January 2025.
- Identify samples of source documents - auditors identify PO, purchase invoices from vendors, letters of passage, and proof of payment.
- Browse documents to journal - auditors ensure that transaction dates, transaction values, and accounts recorded in invoices and purchase journals are appropriate.
- Browse documents to ledgers - the auditor ensures transactions in the Journal have been recorded to the general ledger of office equipment accounts and business cash accounts.
- Checking financial statements - auditors examine the Financial Statements for the January 2025 period and ensure that the purchase value of computer devices is correctly recorded in the general ledger and financial statements.
- Summing up - the auditor certifies that the purchase transaction has been fully recorded, no transaction has not been recorded, and the recording procedure is running as per policy.
Perbedaan Vouching dan Tracing dalam Audit
Vouching and tracing are two fundamental audit procedures that auditors can use in auditing the company's financial statements. These two procedures are opposite each other with some differences as follows.
1. Direction
The vouching procedure has an examination stage from accounting records traced to supporting documents. In contrast, tracing has an examination stage from supporting documents traced to accounting records.
2. Focus
The two also have differences in focus. Vouching focuses on ensuring the validity of transactions, while tracing focuses on ensuring the completeness of transaction recording.
3. Benefits
When the procedure vouching used to review the company's Financial Statements, This can prevent fictitious transactions or manipulation to beautify financial statements.
Temporary procedure tracing used to prevent transactions understated or not recorded by the employee.
Common mistakes in Audit Tracing
Important for an auditor who carry out tracing auditing has several relevant skills. Start understanding the accounting system, document analysis, to accuracy to detail. Therefore, this ability can prevent auditors from some common mistakes as follows.
1. Wrong Direction Of Checking
One of the most common mistakes that can occur is the wrong direction of checking with vouching audit. Tracing audit is the checking of supporting documents to accounting records.
Temporary vouching audit is the checking of accounting records to supporting documents. Misdirection of checks can lead to the detection of unrecorded transactions.
2. Tracking is not done until the Financial Statements
Traceability of transactions in the procedure tracing must be done thoroughly. Starting from supporting documents, journals, ledgers, to financial statements. An incomplete search may result in the completeness goal not being achieved.
3. Unrepresentative Sample Of The Document
Common mistakes in tracing the next audit is sometimes unrepresentative samples of documents. Auditors are often more likely to have samples that are neat, of little value, and come from secure vendors.
This can cause high-risk transactions to be missed. Therefore, it is important for auditors to have independence and honesty in using relevant samples.
4. Period Compatibility Ignored
Another aspect that could potentially be missed or ignored by auditors is the suitability of the period. Less conscientious auditors can unknowingly miss whether a period is recorded in the correct time or not. This can trigger the risk of misstatement of recording time in the company's financial documents.
5. Tracing results are not well documented
After the audit process is completed, the auditor must document the audit results properly. Audit results that are not clearly recorded in the Audit Working Paper (KKA), can trigger the difficulty of proving that audit procedures have been carried out adequately.
Closing
Tracing audit is not just a financial analysis procedure that is carried out to complement other financial analysis. But a control tool that can ensure that all company records have contained transactions correctly and appropriately.
Keeping in mind, the recording of missed or lost transactions can lead to financial discrepancies. Therefore, it is important for companies to tracing audit in the company's financial records.
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