SUBSTANTIVE AUDIT OF CASH
Audit program
Assertions Audit Objectives Audit Procedures
Existence or • To determine • Obtain analysis of cash balance and
occurrence whether cash reconcile to the general ledger.
exists at year- • Confirm bank balances as of balance
end and cash- sheet date by direct correspondence
related with all banks in which the client has
transactions had deposits and loans during the
occur with year.
the year. • Perform cash count procedures for
• To determine cash on hand, undeposited
that all cash collections, petty cash, and other
balances of funds.
the client are ✓ Obtain custodian’s signature to
reflected on acknowledge return of items
the balance counted.
sheet at year- ✓ Reconcile items counted with
end. general ledger balances.
✓ Trace undeposited collections
counted to bank reconciliation.
✓ Follow up dispositions of
items in cash counted.
1. Undeposited collections
should be traced to bank
deposits.
2. Checks accommodated
in petty cash should be
deposited after the count
to establish their
validity.
3. IOUs in the petty cash
should be confirmed and
traced to collections in
the next payroll period.
4. Expense vouchers
should be traced to the
succeeding
replenishment voucher.
5. Coordinate cash count
with count of
marketable securities
and other negotiable
assets of the client.
6. Obtain confirmation of
year-end fund balances
of cash not counted in
branches or other
offices.
• Obtain (prepare) bank reconciliations
as of the balance sheet.
✓ Check arithmetical accuracy of
reconciliation.
✓ Trace balance per book to the
general ledger balance of cash
account.
✓ Trace balance per bank to bank
statement and compare with
amount confirmed by bank.
✓ Establish authenticity of
reconciling items by reference
to their respective sources,
like:
1. Bank debit or credit
advices.
2. Duly approved journal
vouchers.
✓ Investigate checks
outstanding for a long period
of time.
1. Consider adjustment,
especially if the check
is already stale.
2. Consider the possibility
of an erroneous
preparation of the
check.
✓ Investigate any unusual
reconciling items.
✓ Where internal control over
cash is weak, consider
preparing a proof of cash
reconciliation.
• Obtain a list of interbank transfers of
funds a few days before and after the
reporting date.
✓ Vouch supporting documents.
✓ Ascertain that the related
receipts and disbursements
were booked by the client
within the same day or at least
within the same month.
Completeness • To determine • Obtain a cutoff bank statement
whether all containing transactions several days
cash (at least one week) subsequent to the
transactions balance sheet date. Examine items
are recorded returned with the cutoff bank
in the proper statements.
accounting ✓ Trace year-end reconciling
period. items, like:
• Deposit of the year-end
undeposited collections.
• Completeness of year-
end outstanding checks.
• Corrections of bank
errors.
✓ Examine supporting
documents of year-end
outstanding checks that did not
clear in the cutoff bank
statement.
• Prepare proof of cash and reconcile
cash transactions occurring during a
specified period as they are recorded
by the bank and the client.
• Verify the client’s cutoff of cash
receipts and cash disbursements.
Rights and • To determine • Review bank statements and the bank
obligations that cash replies to confirmation letters.
balances are
available for
use without
restrictions
or if with
restrictions,
properly
indicated in
the balance
sheet.
Valuation or • To determine • Verify existence of cash in banks
allocation if cash is under receivership, cash subject to
recorded and court’s restraining order, in foreign
presented at banks and in foreign currency. This is
the proper in addition to the foregoing
amount. procedures which will enable the
auditor to verify proper valuation of
cash.
Presentation • To determine • Investigate any checks representing
and whether cash large or unusual payments to related
disclosure is presented parties.
in • Evaluate proper financial statement
accordance presentation and disclosure of cash.
with
generally
accepted
accounting
principle.
Audit Working Papers
The following pro-forma working papers are usually used by the auditor in the
verification of cash.
1. Cash count sheet
2. Bank reconciliation statement (bank balance to book balance method)
3. Bank reconciliation statement (book balance to bank balance method)
4. Bank reconciliation statement (adjusted balances method)
5. Proof of cash or reconciliation of receipts and disbursements (bank balance to
book balance method)
6. Proof of cash or reconciliation of receipts and disbursements (book balance to
bank balance method)
7. Proof of cash (adjusted balances method)
8. Lapping schedule
9. Working papers to determine adjusted balance of petty cash fund
