TOPIC 3 - AUDIT CASH AND BANK BALANCES

Purpose of Audit of cash balances is

• Verifying whether the recorded cash in general ledger correctly reflects all cash transaction that took place during the year.

• To enable the auditor to express an opinion whether the financial statements are prepared an all material respects, in accordance with an identified Financial reporting framework”.

• Represents currency on hand, cash in bank including certificates of deposit, time or fixed deposits and saving accounts.

Types of Documents and Records

• a copy of bank statement

• Cash book

• Standard letter to request information from financial institutions

• Branch accounts

Audit Objectives for cash and bank balances are

• Obtaining evidence to support the assertions contained in the financial statements, the auditor develops specifics audit objectives that relate to each management assertions.

• Verifying whether the recorded cash in general ledger correctly reflects all cash transaction that took place during the year.

• Explain the various types of management assertions and their relationship to specific audit objectives

Audit test for cash and bank balance are

• Substantive test

• Test of control

• Analytical procedures

• Test of detail of balances

Relates to the auditor’s examination of documentary evidence such as clients accounting records, ledgers and journals and corroborating evidence (payment vouchers, invoices and so on)

Above statement refer to audit procedures for

• Inquiry

• Physical inspections

• Documents inspections

The flowchart above shows the

• Control procedures to be taken by the auditor.

• Internal control for cash and bank procedures.

• Substantive procedure for recorded sales and cash.

Are an important type of procedures of an audit. Consists of evaluation of financial information made by as study of comparisons and relationships among both financial and non-financial data

This statement refers to

• Inquiry

• confirmation

• Analytical procedures

• Recalculation