Describe the differences between vouching and tracing

Exhibit 6.2 compares testing related to the existence and completeness assertions. Panel A illustrates the auditor's work flow when testing for existence. Ibis process is referred to as vouching. Vouching involves taking a sample of recorded transactions and obtaining the original source documents supporting the recorded transaction. For example, for a simple of items recorded in the sales journal, the auditor will obtain the related shipping documents and customer orders. Vouching provides evidence on the assertion that recorded transactions are valid (existence/occurrence). Panel B of Exhibit 6.2 illustrates the auditor's work flow when testing for completeness. Ibis process is referred to as tracing Tracing is sometimes referred to as reprocessing. Tracing involves taking a sample of original source documents and ensuring that the transactions related to the source documents have been recorded in the appropriate journal and general ledger. For example, the auditor might select a sample of receiving reports and trace them to the acquisitions journal and the general ledger. In performing audit procedures, it is important to recognize that some assertions are directional by nature. The existence/occurrence assertion addresses overstatement, whereas the completeness assertion addresses understatement. Therefore, the assertion being tested determines the direction of testing and what type of evidence is relevant. Assets and revenues are most often tested for overstatement because the usual presumption is that managers would prefer to show more assets and revenues. Testing an asset for overstatement also provides corollary evidence on the potential overstatement of revenue and liabilities or the potential understatement of