Relevance of Source Documents to organizations cannot be over emphasized. It is important to an accountant and organization in the event of fraud.
Relevance of Source Documents
1. Audit Trail
Audit trail is a set of accounting documents that authenticate the transactions you record in your accounting books. Furthermore, it provides evidence that transaction has occurred. Also, during audit, source documents serve as back up for accounting journals and ledgers. Every business owner is responsible for recording the company’s transactions. Moreover, the relevance of source document to audit trail is such that it must have to include information about what the event was, who created the event, and the day and time the event happened.
2. Full Details of Transactions
It reveals all the basic fact about the transaction such as the amount of the transaction, to whom the transaction was made, the purpose of the transaction. Also, the date of transaction, serial number of the document, name of document such as Local Purchase Order (LPO), receipt, particular of person issuing the document, particular of person authoring the document, name of company/department issuing the document and name of company/department receiving the document.
3. Internal Control System
Internal controls system are the devices, rules, and measures effected by a company. This internal control ensures the integrity of financial and accounting information, uphold accountability, and prevent fraud. Source document is a good internal control mechanism.
4. Assist Accountants
Source documents assist accountants to prepare financial statement which auditor need for investigation. The movement starts from source documents to journalize transactions. In addition, posting is the process of transferring journal entries to the general ledger or subsidiary ledgers, depending on the needs of a company, by account.
5. Reference
In the accounting world, source documents include purchase order, sales invoice, bank statement, and receipts.
Source documents are created any time a business spends or receives money. However, when there is a report of any investigation into a transaction says fraudulent withdrawal from the bank, the bank statement which is one of the source documents will serve as reference point.
6. Correct Errors
Sources document one will be able to verify whether or not an accounting entry is accurate or correct. It is used to correct errors and omission of transactions. Also, situation where staff will deliberately omit or cause error to occurred will be detected with the investigation of the source documents.
7. Reconciliation
Source documents helps to reconcile with the balances in accounts to see if some documents have not been recorded. Also, if some transactions recorded in the accounts do not appear to have any supporting documents. Frequent reconciliation of account will help to reduce fraudulent activities.
Conclusion.
The relevance of source documents to checkmating fraud is such that organization will need to monitor. That will ensure the right thing is done with the available resources.
He is a doctorate holder, writer and seasoned Chartered Accountant with over 16 years of experience. He has adequate research knowledge in accounting, finance, content creation, SEO, online coaching, student mentorship, academic writing, books and journal publication. He has a keen interest in business and personal growth.
