AUDIT OF CASH

SUBSTANTIVE TESTING OF CASH

Written by Group 7:

1. NI PUTU AYU ARNITA DEWI (1715644025)

2. NI WAYAN TRISNA PURNAMA DEWI (1715644061)
3. I PUTU FENDY ARISYANDANA (1715644103)
4. PUTU DIAH HERAYANTI (1715644115)

JURUSAN AKUNTANSI
PROGRAM STUDI DIV AKUNTANSI MANAJERIAL
POLITEKNIK NEGERI BALI
2019
 (Illustration: Fendy, Isna, Diah and Arnita formed a company which was later given the name CV FIDA.
CV FIDA was a business engaged in retailing. In December 2018 when receiving a checking account from
a bank, a difference was found between the amount of cash in its records and the records cash at the
bank.According to his notes, the cash balance contained in CV FIDA is Rp 118.175.000 but recorded at the
bank is Rp 168.175.000 Then the auditor audits the financial statements as of December 31, 2018 and
issues an independent auditor's report (auditor's opinion) on the date 02 February 2019. During the audit,
the auditor must pay attention to the possibility of events or transactions that occurred after 31 December
2007 to 02 February 2018 that require adjustments or disclosures in the audited financial statements as of
31 December 2018.

Based on the illustration above, we compiled a paper related to substantive testing of cash,
especially on CV FIDA. Cash is an exchange tool and is also used as a measure in accounting
(Baridwan, 2014). According to PSAK 2 (IAI, 2019) cash consists of cash balances (cash on hand)
and checking accounts. In cash flow reporting consists of two methods, namely the direct method
and the indirect method. Entities are encouraged to use the direct method because it provides useful
information in estimating future cash flows that cannot be generated by the indirect method. On this
occasion we will discuss cash audits, especially at CV FIDA. Cash accounts are one component in
the financial statements, of course it is necessary to conduct an audit to ensure that the reports
presented are in accordance with procedures to meet their objectives based on PSAK 1 (IAI, 2019)
and increase the confidence of users of the financial statements in accordance with the audit
objectives in SA 200 (IAPI, 2013) and the auditor must pay attention accounting policies used by
the entity in the preparation and presentation of financial statements in accordance with PSAK 25
(IAI, 2019). Based on this background, the management of CV FIDA agreed to use external audit
services to provide an opinion on the company's financial statements.
Before an audit of the financial statements is carried out, the auditor needs to consider
whether he will accept or reject the audit engagement of CV FIDA in accordance with SA 210 (IAPI,
2013). After making an engagement, then the auditor is obliged to prepare an audit plan in
accordance with SA 300 (IAPI, 2013). To identify and assess the risk of material misstatement
through an understanding of the entity and its environment the auditor must first understand the
client's business based on SA 315 (IAPI, 2013). After that the auditor must communicate by
conducting interviews with functions related to each responsibility carried out in accordance with SA
265 (IAPI, 2013) whether there is a deficiency or not. In internal control, the Auditor assesses,
explores information and communication related to actions, policies, and procedures applied to long-
term debt, how CV FIDA identifies, analyzes, and manages risks that might or might have occurred
in recording, as well as assessing and overseeing whether control internal processes have been
carried out effectively and efficiently. After the auditor has identified the material misstatement, in
accordance with SA 320 (IAPI, 2013) the auditor must apply the concept of materiality in planning
and conducting audits of financial statements. Once identified, the auditor has the duty to obtain
sufficient and appropriate evidence and respond to fraud or suspected fraud to the risks identified in
CV FIDA in accordance with SA 240 (IAPI, 2013).
To obtain sufficient and appropriate audit evidence relating to the risk assessment of material
misstatement, in accordance with SA 330 (IAPI, 2013) it is necessary to design substantive testing
procedures in the form of detailed testing and substantive analytical procedures and the auditor must
pay attention to when, nature and extent. According to Mulyadi, the initial audit procedure carried
out at CV FIDA was to investigate ledger accounts including cash (current accounts in banks), cash
on the way (cash receipts that had not been deposited to the bank on the date of making financial
statements), petty cash funds (remaining cash held by petty cash fund holders). Then the auditor
recalculates the cash account balance in the ledger, traces the initial cash account balance to the
working paper last year in accordance with SA 510 (IAPI, 2013), reviews the extraordinary
mutations in the number and source of posts in the Cash account, investigates the debit and credit
posts of the Cash account to in the cash receipts journal and the cash disbursement journal. In
addition, the Auditor carries out analytical procedures to understand the client's business and
discover areas that require more intensive auditing in accordance with SA 520 (IAPI, 2013).
The first inspection can be done by calculating cash balances, deposits in transit, and checks
that are still outstanding. Then check through bank reconciliation to find the correct cash balance
between the balance according to the company and the balance according to the bank statement.
After the bank reconciliation was made on CV FIDA, it turned out that the amount of cash according
to company records was different from the balance according to the bank where the cash company
should have amounted to Rp 118.175.000 but the balance according to the bank's report showed the
amount of Rp 168.175.000. After that the Auditor conducts a detailed transaction testing by
examining supporting documents. To carry out detailed transaction testing on cash balances, an
examination of the Cash Expenditure Journal, the Cash Receipts Journal, the Check Register. After
conducting a detailed transaction test, it turned out that the auditor found that there was a difference
between the amount in Check No. 4247 in which the disbursed amounted to Rp 48.000.000
according to the check stump but, at the company check register of Rp 98.000.000, the check was
issued to purchase merchandise inventory to UD. Goleran Rebah on February 2, 2019. Sufficient
audit evidence is a mandatory thing that must be prepared before conducting an evaluation in
accordance with SA 500 (IAPI, 2013) . To obtain relevant and reliable evidence in accordance with
SA 505 (IAPI, 2013) , external confirmation can be made to the parties concerned to help identify
risks of material misstatement relating to relationships and related party transactions based on SA
550 (IAPI, 2013) .
 In this case the company can confirm the disbursement of funds to the check holder and
confirm to the accounting department the amount that should be disbursed by the check holder.
Based on confirmation from related parties, the correct check amount is Rp 48.000.000. As a result
of a company recording error of Rp 50.000.000 on the purchase of merchandise inventory, the
auditor suggested making corrections. The following is a correction journal to equate CV FIDA cash
balances with bank statements:
10/01/2019 Cash Rp 50.000.000
Account Payable Rp 50.000.000
(Error Checking Check No. 4247)
In addition, after the balance sheet date, a new court ruling has been issued for lawsuits filed
against the company for the accident that occurred on 10 October. The company has estimated the
obligation to be paid due to the incident amounting to Rp 10.000.000. But the court's verdict ruled
that the company must provide compensation of Rp 30.000.000, - This is a subsequent event because
events occur after the balance sheet date and have an impact on financial statements that are material
so that they need to be adjusted accordance with SA 560 (IAPI, 2013) . The adjusting entries are as
follows:

12/01/2019 Penalty Expense Rp 20.000.000

Cash Rp 20.000.000

In this case, a nominal amount of Rp 10.000.000 is not a subsequent event because it has been
estimated in number. But a fine of Rp The remaining 20.000.000 are subsequent events because they
were not expected.
After conducting substantive testing, errors found by the auditor and subsequent events that
occur are included in material errors. However, this does not result in the company's business
continuity being disrupted or in other words the company can still operate in accordance with SA
570 (IAPI, 2013). The auditor determines opinion based on the level of material misstatement, the
nature of the cause of modification and the level of pervasive impact on the financial statements in
accordance with the table below.
 Auditor's Consideration About How Pervasive The Impact Or
The nature of things that
Possible Impact On The Financial Statements, Affects The
cause modification of opinion
Type Of Opinion To Be Declared:
Material but not Pervasive Material and Pervasive

Financial statements contain

“Fair With Exceptions” “Unreasonable”
material misstatement

Inability to obtain sufficient

“Fair Without Exceptions” “Not Expressing Opinion”
and appropriate audit evidence

Upon all the evaluation processes for the presentation of financial statement disclosures, then
the auditor can formulate an opinion and draw conclusions in accordance with SA 700 (IAPI, 2013).
What is presented in the financial statements get Unqualified Opinion, Qualified Opinion, Adverse
Opinion, Disclaimer of Opinion opinion. However, if the company refuses to make adjustments in
accordance with SA 705 (IAPI, 2013) regarding modification of opinions in the independent
auditor's report, then the audit opinion may be reasonable with a qualified opinion. Because the
company accepted the auditor's proposal to make adjustments, the auditor gave an opinion that CV
FIDA’s financial statements were reasonable without exceptions.
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