Certificates of deposit are easily withdrawn. Often the only penalty for closing out a CD is a loss of interest. Banks will generally cash out a certificate of deposit to anyone on the signature card. As part of the audit process, we need to ensure that the cash is on the financial statements at the right amount value.
Most certificates of deposit accrue interest and have a very minimal early withdrawal penalty. The login page will open in a new tab. After logging in you can close it and return to this page. How to Audit Cash In this post, we will take a look at the following: Primary cash assertions Cash walkthrough Directional risk for cash Primary risks for cash Common cash control deficiencies Risk of material misstatement for cash Substantive procedures for cash Common cash work papers Primary Cash Assertions The primary relevant cash assertions are: Existence Completeness Rights Accuracy Cutoff Of these assertions, I believe existence, accuracy, and cutoff are most important.
Cash Walkthrough As we perform walkthroughs of cash, we normally look for ways that cash might be overstated though it can also be understated as well. In performing cash walkthroughs, ask questions such as: Are timely bank reconciliations performed by competent personnel?
Are all bank accounts reconciled? Are the bank reconciliations reviewed by a second person? Are all bank accounts on the general ledger? Are transactions appropriately cut off at period-end with no subsequent period transactions appearing in the current year? Is there appropriate segregation between persons handling cash, recording cash, making payments, and reconciling the bank statements What bank accounts were opened in the period?
What bank accounts were closed in the period? Are there any restrictions on the bank accounts? What persons are on the bank signature cards? What is the nature of each bank account e. Are there any cash equivalents e. Directional Risk for Cash What is directional risk? Share 3. March 8, at pm. Charles Hall says:. In the procedures of audit cash, we usually review the bank reconciliation statement at the year-end to make sure that client has taken into account all adjusting and reconciling items, such as deposits in transit, outstanding check, and bank charges, into the bank reconciliation.
In addition, we also need to check and verify that the adjusted items have been corrected recorded in the balance sheet. Audit Cash Overview Cash is usually an inherently risky asset on the balance sheet when we audit cash accounts. Audit Assertions for Cash In the audit of cash, we usually test the audit assertions included in the table below: Audit assertions for cash Existence Cash balances on the balance sheet really exist at the reporting date.
Completeness Cash balances include all cash transactions that have occurred during the accounting period.
Rights and obligations The company has title to the cash accounts as of the reporting date. Valuation or allocation The recorded balances reflect the true underlying economic value of the cash and cash equivalents.
Presentation and disclosure Cash is properly classified on the balance sheet and adequate disclosure has been made in the notes to the financial statements.
Cash balances on the balance sheet really exist at the reporting date. Recognize the extended audit procedures of the general cash account to test further for material fraud. Question 1 You have worked on the audit for Company A for a few years and this year you are in charge of the audit. A newly recruited accounting graduate who has no practical experience is assigned as your assistant. You have already conducted tests of controls for the transaction cycles and control risks are assessed as relatively low for these cycles.
You decide the first task to set for your assistant is the verification of cash at bank and in hand. A lead schedule stating all the bank balances and cash in hand balance of the current and last years, bank statements and bank reconciliation statements are provided by the client. Why is the audit of cash an important part of the audit?
The items which appeared in the bank reconciliation statements are mainly unpresented cheques and deposits in transit.
Evaluate this statement by considering the circumstances under which evidence gathered is in general considered to be reliable in accordance with HKSA Audit Evidence. The cheque is deposited in a second account just before year-end and recorded as a cash receipt in the current period. Interbank transfer schedule is usually obtained if there are numerous bank transfers, regardless of internal controls or for the purpose of detecting suspected fraud.
Ans: B is correct because the receipt is recorded on the books prior to year-end, while the disbursement is recorded subsequent to year-end. Therefore, the cash on the books is overstated. If you are the author of the text above and you not agree to share your knowledge for teaching, research, scholarship for fair use as indicated in the United States copyrigh low please send us an e-mail and we will remove your text quickly. Fair use is a limitation and exception to the exclusive right granted by copyright law to the author of a creative work.
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