Under the Indian Stamp Act, 1899, instruments whereby payment is acknowledged, should bear a revenue stamp. An auditor, therefore, should see that the receipts produced in evidence of payments, shown to have been made are properly stamped. The date of issue of a stamp paper from the stamp office is entered on its back. The design on revenue stamp also is changed from time to time. Such information sometimes may provide a clue leading to the discovery that a receipt has been forged or agreement has been ante-dated. It is the practice with some big companies to have a receipt form printed on the back of their cheques, so that the endorsement on the cheque may be accepted as an evidence of payment. Such cheque forms are specially printed by the bank under an agreement with the customer. The system has a drawback from the point of view of the auditor in so far as that such a receipt is only an evidence of the fact that the amount has been paid by the bank; but not that of the identity of the party to whom the payment is purported to have been made. As a safeguard, the auditor should see that adequate precautions to prevent payments being made to wrong persons were being taken by the client’s office (One precaution could be that all cheque forms should have “Account payee only” printed on them). It would also be advisable for him to refer other connected documents, viz., invoices, debit notes, etc. against which payments have been made before accepting such receipts as evidence of payment of money. In such cases, the auditor would be well advised to obtain confirmation of balances of personal accounts and, wherever practicable, these should be obtained directly by him.
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