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Topic 5b - Audit of Cash and Bank Balances

This document discusses the audit of cash and bank balances. It begins by outlining the learning objectives, which are to understand the audit approach, control objectives, and procedures for auditing cash and bank balances. It then describes the types of cash accounts that may exist, including general cash, branch bank accounts, impress petty cash funds, and impress payroll accounts. The document provides examples of control objectives and procedures for cash and banks, as well as audit procedures that include obtaining bank confirmations and statements, testing bank reconciliations, and fraud-oriented procedures if internal controls are weak. Specific procedures are outlined for auditing petty cash and impress payroll accounts, such as counting cash balances, examining transactions, and reconciling accounts.

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262 views10 pages

Topic 5b - Audit of Cash and Bank Balances

This document discusses the audit of cash and bank balances. It begins by outlining the learning objectives, which are to understand the audit approach, control objectives, and procedures for auditing cash and bank balances. It then describes the types of cash accounts that may exist, including general cash, branch bank accounts, impress petty cash funds, and impress payroll accounts. The document provides examples of control objectives and procedures for cash and banks, as well as audit procedures that include obtaining bank confirmations and statements, testing bank reconciliations, and fraud-oriented procedures if internal controls are weak. Specific procedures are outlined for auditing petty cash and impress payroll accounts, such as counting cash balances, examining transactions, and reconciling accounts.

Uploaded by

LANGITBIRU
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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AUD 589

AUDITING 1

Audit of Cash and Bank Balances

Prepared by:
Yusarina Mat Isa
UiTM Kampus Puncak Alam
Learning Objectives
 Able to:
• Understand the audit approach for cash and bank
balances
• Understand the control objectives for cash and
bank balances
• Understand the audit procedures in auditing cash
and bank balances

2
CASH AND BANK BALANCES
• Most liquid assets in the SOFP
• Vulnerable - susceptibility of cash to fraud
greater than other assets
• Cash and bank balances relates to other
cycles. Auditor must:
• Know importance of tests of various cycles to the audit
of cash
• Understand the integration of the different cycles
• Involves transaction and balance

3
TYPES OF “CASH” ACCOUNTS
1. General cash account (Cash in hand)
• Main account - all receipts and disbursement of cash flow through this
account
2. Branch bank account
• For companies operating at multiple locations
• Much like general account, but at branch level
3. Impress petty cash fund
• Preset amount of cash set aside for incidental small expenses
• Minimum amount should be maintained
4. Impress payroll account
• Set aside fund where a minimum fixed balance is maintained
• Separate bank account
• Balance is furnished before each pay period
5. Other cash equivalents
• Liquid, short-term assets
• Time deposits, certificate of deposits, other money market funds

4
CONTROL OBJECTIVES, CONTROL PROCEDURES, TEST OF
CONTROLS (examples)
Control objective Control procedures Test of controls
• all sums are received • Only the cashiers or • Agree a sample of cash
and accounted for other appointed banked-in with till rolls
• only authorized and official can receive and paying in slips and
valid payments the cash. verify that the receipts are
should be made • Evidence of receipt banked in intact
• all receipts and of cash by issuing • Test check to ensure that
payments are serially numbered Bank reconciliation has
promptly and receipt forms been prepared promptly
accurately recorded • Limitations on cash and checked by a senior
floats held by the official.
cashier • For a sample of payments
made, check that the
person authorising the
payment voucher is
different from the person
who sign the cheques

5
AUDIT PROCEDURES FOR CASH/BANK BALANCE
 Receipt of bank confirmation
 Receipt of cut-off bank statement
 Test of bank reconciliation
 Fraud-oriented procedures – audit procedures
normally performed when the internal control is
weak and high risk of fraud
 Extended test of bank reconciliation
 Proof of cash
 Test of interbank transfers

6
AUDIT OF IMPRESS PETTY CASH
 Small amount, but verified in many audits mainly
due to high risk of fraud
 Internal control for petty cash:
 Must be responsibility of one individual
 Petty cash funds should not be mingled with other
receipts and payments
 Types of expenditure allowed from petty cash
 Limit on amount of expenditure
 Minimum level of fund
 Approval of responsible official – separate from
custodian of petty cash
 Pre-numbered petty cash form
 Periodic surprise count
 Reconciliation of petty cash fund

7
AUDIT OF IMPRESS PETTY CASH
 More test of controls rather than test of balance &
transaction
 Procedures:
 Review client procedure in handling the cash
 Examine documentations of few transaction
 Count petty cash balance
 Test of reimbursement transactions

 Test typically done once at the interim date

8
AUDIT OF IMPRESS PAYROLL ACCOUNT
 To obtain bank reconciliation, bank confirmation and cut-off
bank statement
 Procedure:
 To reconcile figures from the above documents
 To reconcile impress payroll bank account with general ledger
impress cash balance.
 Normal findings – outstanding cheques not yet
issued/encashed

9
End of Topic 5b

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