AUDIT PROGRAM FOR CASH AUDIT PROGRAM FOR CASH11
Audit Objectives Audit Objectives To determine that: To determine that:
a)
a) Cash balCash balances at tances at the end of the rehe end of the reportiporting period rng period represepresent cash anent cash and cash ited cash items on hand, ims on hand, inn transit to, or in depository banks.
transit to, or in depository banks. b)
b) Cash transactions have been properly recorded.Cash transactions have been properly recorded. c)
c) Cash balaCash balances are prnces are properly doperly descriescribed and clasbed and classifisified and adequaed and adequate disclte disclosures osures withwith respect to amounts restricted as to withdrawal are made in
respect to amounts restricted as to withdrawal are made in the financial statements.the financial statements. Audit Procedures
Audit Procedures 1)
1) Conduct a caConduct a cash count osh count of undeposf undeposited colited collectilections, petons, petty cash, aty cash, and other fund other funds.nds.
o
o btain custodian!s signature to acknowledge return of btain custodian!s signature to acknowledge return of items counteditems counted o
o "econcile items counted with general ledger balances"econcile items counted with general ledger balances o
o Trace undeposited collections counted to bank reconciliationsTrace undeposited collections counted to bank reconciliations o
o #ollow up dispositions of items in cash counted:#ollow up dispositions of items in cash counted:
$ndeposited collections should be traced to bank deposits$ndeposited collections should be traced to bank deposits
Checks accommodated in petty cash should be deposited after the count toChecks accommodated in petty cash should be deposited after the count to establish their validity
establish their validity
%$s in the petty cash should be %$s in the petty cash should be confirmed and traced to collections in theconfirmed and traced to collections in the ne&t payroll period
ne&t payroll period
'&pense vouchers should be traced to the succeeding replenishment voucher '&pense vouchers should be traced to the succeeding replenishment voucher
o
o Coordinate cash count with count of Coordinate cash count with count of marketable securities and other negotiable assetsmarketable securities and other negotiable assets
of the client of the client
o
o btain confirmation of year(end fund balances of cash not counted in branches orbtain confirmation of year(end fund balances of cash not counted in branches or
other offices other offices )
) ConfirConfirm bank balance by dim bank balance by direct corrrect correspondespondence with alence with all banks in whil banks in which the cliench the client has hadt has had deposits and loans during the year
deposits and loans during the year *)
*) btbtain ain banbank rk recoeconcincilialiatitionon
o
o Check arithmetical accuracy of reconciliationCheck arithmetical accuracy of reconciliation o
o Trace balance per book to the general ledger balance of cash accountTrace balance per book to the general ledger balance of cash account o
o Trace balance per bank to bank Trace balance per bank to bank statement and compare with amount confirmed bstatement and compare with amount confirmed byy
bank bank
o
o 'stablish authenticity of reconciling items by reference to their respective sources'stablish authenticity of reconciling items by reference to their respective sources
like bank debit or credit advices or duly approved +ournal vouchers like bank debit or credit advices or duly approved +ournal vouchers
o
o %nvestigate checks outstanding for a long period %nvestigate checks outstanding for a long period of timeof time o
o %nvestigate any unusual reconciling items%nvestigate any unusual reconciling items o
o here internal control over cash is weak, consider preparing a proof of cashhere internal control over cash is weak, consider preparing a proof of cash
reconciliation reconciliation
the cutoff bank statement
4) btain a list of interbank transfers of funds a few days before and after the reporting date
o 5ouch supporting documents
o 6scertain that the related receipts and disbursements were booked by the client within
the same date or at least within the same month 7) Test reasonableness of cutoff by:
Comparing dates of checks returned with cutoff bank statement to dates of recording in the cash disbursements register
Tracing receipts recorded a few days before the reporting date to bank deposits 8) %nspect savings account passbook and certificates of deposits
o "econcile with book balances
o $pdate interest earned posting on passbooks, if necessary o Compare balances with bank confirmation reply
9) etermine any restrictions on availability of cash
;) etermine propriety of financial statement presentation and adequacy of disclosures Internal Control uestionnaire !or Cas"#
ate of '&amination: 6s of <<<<<<<<<<<<<<<<<<<<<<<<<
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"eceived by: <<<<<<<<<<<<<<<<<<<<<<<<< ate: <<<<<<<<<<<<<<<<<<<<<<<<
Yes No N/A Remarks Recurrence
1. Are the purchasing department, accounting department, receiving department and shipping department independent of each other?
2. Are receiving reports prepared for each item received and copies transmitted to inventory custodians? To purchasing? To the accounting department?
3. Are purchases made for employees authorized through regular purchases procedures?
4. Are quantity and quality of goods received determined at the time of receipt y receiving personnel independent of the purchasing department?
!. Are vendors" invoices matched against purchase orders and receiving reports efore a liaility is recorded?
#. $o managers compare actual e%penses to udget?
&. Are vouchers canceled 'ith a (A)$ stamp 'hen paid?
*. Are shipping documents authorized and prepared for goods returned to vendors?
+. Are invoices approved for payment y a responsile officer?
13. Are vendors" invoices listed immediately on receipt?
14. Are unmatched receiving reports revie'ed frequently and investigated for proper recording?
1!. )s statistical analysis used to e%amine overall purchasing levels?
1#. Are vendors" monthly statements reconciled 'ith individual accounts payale accounts?
Accuracy
1&. Are competitive ids received and revie'ed for certain items?
1*. Are all purchases made only on the asis of approved purchase requisitions?
Verification
1+. Are purchase prices approved y a responsile purchasing officer?
2. )s accounts payale reconciled to the general ledger every period?
21. Are monthly statements revie'ed y senior officials?
Classification
22. $o the chart of accounts and the accounting manual give instructions for classifying deit entries 'hen purchases are recorded?
23. Are /ournal entries authorized at appropriate levels?
Cut-Off
24. $oes the accounting manual give instructions to date purchases0payale entries on the date of receipt of goods?
MU$TIP$% CHOIC% U%STIO&S'
1) hich of the following is most likely to be considered a risk factor relating to fraudulent financial reporting@
a. omination of management by top e&ecutives b. Aarge amounts of cash processed
c. Begative cash flows from operations d. 2mall high(dollar inventory items
) 6n auditor suspects that certain client employees are ordering merchandise for themselves over the %nternet without recording the purchase or receipt of the merchandise. hen vendors! invoices arrive, one of the employees approves the invoices for payment. 6fter the invoices are paid, the employee destroys the 3 1*(1- iley C=6 '&amination "eview
invoices and related vouchers. %n gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all
a. Cash isbursement b. 6pproved vouchers
c. "eceiving reports d. 5endors! invoices
*) 6ssume that a company has a control deficiency regarding the processing of cash receipts. "econciliation of cash accounts b y a competent individual otherwise independent of the cash function might make the likelihood of a significant misstatement due to the control deficiency remote. %n this situation, reconciliation may be referred to as what type of control@
a. Compensating b. =reventive
c. 6d+ustive d. Bonroutine
-) hich of the following procedures would an auditor most likely to perform to test controls relating to management!s assertion about the c ompleteness of cash receipts for cash sales at a retail outlet@
a. bserve the consistency of the employees! use of cash registers and tapes b. %nquire about employees! access to recorded but undeposited cash
c. Trace deposits in the cash receipts +ournal to the cash balance in the general ledger
d. Compare the cash balance in the general ledger with the bank confirmation request
4) 2ound internal control dictates that immediately upon receiving checks from customers by mail, a responsible employee should
a. 6dd the checks to the daily cash summary
b. 5erify that each check is supported by a prenumbered sales invoice c. =repare a duplicate listing of checks received
d. "ecord the checks in the cash receipts +ournal
7) 6n auditor suspects that a client!s cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. %n attempting to uncover this embelement scheme, the auditor most likely would compare the
a. ates checks are deposited per bank statements with the dates remittance credits are recorded
b. aily cash summaries with the sums of the cash receipts +ournal entries c. %ndividual bank deposit slips with the details of monthly bank statements d. ates uncollectible accounts are authoried to be written off with the
dates the write(offs are actually recorded
8) $pon receipt of customers! checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. 6 copy of the listing should be sent to the
a. %nternal auditor to investigate the listing for unusual transactions b. Treasurer to compare the listing with the monthly bank statement
c. 6ccounts receivable bookkeeper to update the subsidiary accounts receivable records
d. 'ntity!s bank to compare the listing with the cashier!s deposit slip 9) %n testing controls over cash disbursements, an auditor most likely would
determine that the person who signs checks also a. "eviews the monthly bank reconciliation b. "eturns the checks to accounts payable
c. %s denied access to the supporting documents d. %s responsible for mailing the checks
;) hich of the following sets of information does an auditor usually confirm on one form@
a. 6ccounts payable and purchase commitments b. Cash in bank and collateral for loans
c. %nventory on consignment and contingent liabilities d. 6ccounts "eceivable and 6ccrued %nterest "eceivable
1) The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form 3ay
a. Bot believe that the bank is obligated to verify confidential information to a third party
b. 2ign and return the form without inspecting the accuracy of the client!s bank reconciliation
c. Bot have access to the client!s cutoff bank statement
d. ?e unaware of all the financial relationships that the bank has with the client
11) 6n auditor most likely would limit substantive audit of sales transaction when control risk is assessed as low for the occurrence assertion concerning sales transactions and the auditor has already gathered evidence supporting
a. pening and closing inventory balances b. Cash receipts and accounts receivables
c. 2hipping and "eceiving activities d. Cutoffs of sales and purchases
1) 6n auditor should trace bank transfers for the last part of the audit period and first part of the subsequent period to detect whether
a. The cash receipts +ournal was held open for a few days after the year end b. The last checks recorded before the year(end were actually mailed by the
year(end
c. Cash balances were overstated because of kiting
d. 6ny unusual payments to or receipts from related parties occurred 1*) To gather evidence regarding the balance per bank in a bank reconciliation, an
auditor would e&amine all of the following e&cept a. Cutoff bank statement
b. Dear(end bank statement c. ?ank confirmation
d. /eneral ledger
1-) 6 cash shortage may be concealed by transporting funds from one location to another or by converting negotiable assets to cash. ?ecause of this, which of the following is vital@
b. 2imultaneous bank reconciliations c. 2imultaneous verification
d. 2imultaneous surprise cash count
14) The primary purpose of sending a standard confirmation request to financial institutions with which the client has done business during the year to
a. etect kiting activities that may otherwise not be discovered b. Corroborate information regarding deposit and loan balances
c. =rovide the date necessary to prepare a proof of cash
d. "equest information about contingent liabilities and secured transactions A&S(%RS 1) C ) 6 *) 6 -) 6 4) C 7) 6 8) C 9) ;) ? 1) 11) ? 1) C 1*) 1-) C 15) ?
