Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
22AUDIT OF CASHBALANCE
Society Expects A
Lot From Auditors
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Cash in the Bank
and
Transaction Cycles
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Cash in the Bank and Transaction Cycles
Failure to bill a customer
Billing a customer at a lower price than called for by company policy
a defalcation of cash by interception of cash receipts from customers before
they are recorded,with the account charged off as a dab debt
Duplicate payment of a vendor’s invoice
Improper payments of officers’ personal expenditures
Payment for raw materials that were not received
Payment to an employee for more hours than he or she worked
Payment of interest to a related party for an amount in excess
of the going rate
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
General Cash Account
Imprest Payroll Account
Branch Bank Account
Imprest Petty Cash Fund
Cash Equivalents
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FIGURE 22 -2
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
AUDIT OF THE
GENERAL CASH ACCOUNT
Receipt of a Bank
Confirmation
Receipt of a Cutoff
Bank Statement
Tests of the
Bank Reconciliation
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FIRGURE 22 -4
Working Paper for a
Bank Reconciliation
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FIRGURE 22 - 5
Standard Confirmation
of Financial Institution
Account Balance Information
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FIRGURE 22 - 5
Types of audit Tests Used for General Cash in the Bank
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FRAUD-ORIENTED PROCEDURES
Extended Tests of the Bank Reconciliation
All recorded cash receipts were deposited.
All deposits in the bank were recorded in the accounting records.
All recorded cash disbursements were paid by the bank.
All amounts that were paid by the bank were recorded.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Proof of Cash
A reconciliation of the balance on the bank statement
with the general ledger balance at the beginning of
the proof-of-cash period.
A reconciliation of cash receipts deposited per the
bank with the cash receipts journal for a
given period.
A reconciliation of cancelled checks clearing the bank
with the cash disbursements journal for a
given period.
A reconciliation of the balance on the bank statement
with the general ledger balance at the end of the
proof-of-cash period.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FIGURE 22 - 7
Interim
Proof of Cash
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Types of Cash Accounts
and their Relationship
to the General
Cash Account
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
FIGURE 22 - 8
Interbank Transfer working Paper
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Petty cash is a unique account because it is often immaterial
in amount,yet it is verified on many audits.
The account is verified primarily because of the potential
for defalcation and the client’s expectation of an audit
review even when the amount is immaterial.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Transactions in most cycles affect the cash account.
Wait to audit the ending cash balance until the
controls and substantive tests of transactions
have been completed for all cycles.
Tests of the cash balance normally include include
tests of the bank reconciliation’s of key cash
accounts,such as the general cash accounts,
imprest payroll account,and imprest
petty cash fund.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Which of the Following Misstatements
Will Be Uncovered by a Carefully
Prepared Independent Bank
Reconciliation
Cash receipts recorded in the cash receipts journal but lost before deposit.
A check recorded in the cash disbursements journal for an amount $100
greater than the amount that the check was written for.
Cash receipt lost before it was recorded in the cash receipts journal.
Bank debit memo that should have been charged to a different customer.
A check written for $100 more than the amount on the vendor’s invoice.
A stop-payment by a customer where the client was not informed that the
stop-payment had taken place.