Internal Audit Department Audit Program for Cash Audit Scope: Audit Objectives: Risks Cash transactions may not be recorded accurately Cash may not exist • •
Audit Procedures 1. Confirm selected bank accounts accounts and special special arrangements Select bank accounts for confirmation in order to obtain a moderate to low level of assurance that the aforementioned audit objectives are achieved. Bank confirmations should be sent to all banking relationships to identify accounts not included in the general ledger. Confirmation requests should be sent under our control and, second requests and, where warranted, third requests should be mailed when responses to confirmation requests have not been received within a reasonable time. Consider sending a special inquiry letter to ascertain the existence of special arrangements or restrictions, for example, compensating balance arrangements, security arrangements, written guarantees. 2. Review confirmation replies For confirmations returned: a) agree account information and account balance to comparative summary; b) investigate all discrepancies reported or questions raised in review and determine whether any adjustments are necessary; and c) assess impact of special special arrangemen arrangements ts or restrictions identified and determine whether disclosure is appropriate. 3. Test accounts where there is no confirmation In the unusual situation where we do not receive a
Done by
Date
W/P Ref
bank confirmation and are willing to forego the receipt of the bank confirmation, consider performing the following procedures to obtain a high level of assurance that the aforementioned audit objectives are achieved: a) obtain subsequent month bank statement, bank reconciliation and supporting documentation. Consider obtaining information directly from the bank; b) test the mathematical accuracy of the bank reconciliation; (accuracy) c) trace outstanding items listed on the bank reconciliation to the subsequent month's bank statement and for those not traced, trace to the cash disbursements records for the period prior to the balance sheet date; (accuracy and existence/occurrence) d) trace deposits in transit listed on the bank reconciliation to the subsequent month's bank statement and for those not traced, trace to the cash receipts records for the period prior to the balance sheet date; (accuracy and existence/occurrence) e) obtain explanation for large, unusual reconciling items and trace to supporting documentation and/or entries in the cash records, as appropriate; (accuracy and existence/occurrence) f) review the date the above items cleared the bank or were recorded in the client's books to ensure appropriate recording period. Trace to supporting documentation as necessary; and (cut-off) g) investigate items such as, long outstanding items, dishonoured checks and significant adjustments in the subsequent month, and record adjustments as necessary. (accuracy and existence/occurrence) 4. Test bank reconciliations Test bank reconciliation in order to obtain a moderate to low level of assurance that the aforementioned audit objectives are achieved by performing the following: a)test the mathematical accuracy of the reconciliation; (accuracy) b) trace book balances on the client's bank reconciliation to the comparative summary; (accuracy) c) trace bank balances on the client's bank reconciliation to the bank statement; (accuracy) d) test reconciling items on the bank reconciliation by performing the following:
i)
obtain subsequent month bank statement and supporting documentation. Consider obtaining information directly from the bank;
ii) trace outstanding items listed on the bank reconciliation to the subsequent month's bank statement and for those not traced, trace to the cash disbursements records for the period prior to the balance sheet date; (accuracy and existence/occurrence) iii) trace deposits in transit listed on the bank reconciliation to the subsequent month's bank statement and for those not traced, trace to the cash receipts records for the period prior to the balance sheet date; (accuracy and existence/occurrence) iv) obtain explanation for large, unusual reconciling items and trace to supporting documentation and/or entries in the cash records, as appropriate; (accuracy and existence/occurrence) v) review the date the above items cleared the bank or were recorded in the client's books to ensure appropriate recording period. Trace to supporting documentation as necessary; and (cut-off) vi) investigate items such as, long outstanding items, dishonored checks and significant adjustments in the subsequent month, and record adjustments as necessary (accuracy and existence/occurrence). e) review client's bank reconciliation for review and approval by appropriate management and timely completion of reconciliation.
