Importance of the audit of Cash and

Cash Equivalent :

1.Almost all business transactions

involved cash

2.Cash is highly liquid asset and is

an area of high inherent risk
Assertions:
Cut-off -to ensure that amounts are recorded in
proper period.
Completeness -to ensure that there is no unrecorded
cash.
Valuation -to ensure that cash are recorded and
presented at proper amounts.
Existence -to ensure that cash is in existence
and belong to the company.
Rights and -to ensure that cash balances are
Obligation available for use without restrictions.

Presentation -to ensure that cash is presented in

and Disclosure accordance with the GAAP.
Audit Procedure:

1. Get a clear understanding about the

processes and procedures that the
organization applies.
2. Confirmation of bank balances.

3. Perform cash count for cash on hand.

4. Obtain bank reconciliation.

5. Cut-off procedures.
5. Review bank statements and banks'
replies to confirmation letters .
6. Investigate .

7. Evaluate proper financial statement

presentation of cash and cash
equivalent.
Cash fraudulent activities:
1.Intercept at Cash Register
2.Intercept at Cashier
3.Intercept in Deposit Pouch
4.Petty Cash Removal
5.Pay Envelope Removal
6.Skimming
7. Cash Larceny
8. Fraudulent Disbursement
9. Payroll Scheme
Fraud - Related Audit
Procedures:

1. Proof of cash
2. Testing for kiting
3. Testing for lapping
 Proof of cash:

1. All cash receipts recorded in the

client’s accounting records were
deposited in the client’s bank account.
2. All cash payments recorded in the
client’s accounting records have been
cleared.
3. No bank transactions have been omitted
from the client’s accounting records.
Test of Kiting:

1. Comparing the disbursements and

receipts to cash book.

2. Compare the dates of transfers.

Test of Lapping:

1. Obtaining a cut-off bank statement.

2. Checking the details of customer payments

3. Comparing the cheques

1. What is the effect of not replenishing
the petty cash fund at year end and not
making the appropriate adjusting entry?

a. A detailed audit is necessary.

b. The petty cash custodian should turn over the

petty cash to the general cashier.
c. Cash will be overstated and expenses will be
understated.
d. Expenses will be overstated and cash will be
understated.
2. What is the adjusted cash in bank?
Balance per bank statement 1,805,000
Deposit in Transit 325,000
Return of Customer’s check-NSF 60,000
Outstanding Check 275,000
Bank service Charge 10,000

a. 1,855,000
b. 1,795,000
c. 1,785,000
d. 1,755,000
3. What total amount should be reported as Cash?
Cash on hand 500,000
Demand deposit 4,000,000
Certificate of deposit 2,000,000
Postdated customer check 300,000
Petty cash fund 50,000
Traveler’s check 200,000
Manager’s check 100,000
Money order 150,000

a. 7,000,000
b. 4,800,000
c. 6,800,000
d. 5,000,000
4. An imprest petty cash fund would least likely be
used to pay for which of the following items?

a. Minor office supplies

b. Monthly interest expense

c. Stamps for small mailing

d. Small contribution to local charity