CHAPTER

Audit of Cash and Financial

23
Learning Objectives
Instrument

After studying this chapter, you should be able to:

1. Identify the major types of cash and financial instruments accounts maintained by
business entities;
2. Show the relationship of cash in the bank to the various transaction cycles;
3. Design and perform audit tests of the general cash account;
4. Recognize when to extend audit tests of the general cash account to test further for
material fraud;
5. Design and perform audit tests of financial instruments.
 Four Phases of an Audit

Perform analytical
Plan and design procedures and
Phase I Phase III
an audit approach. tests of details
of balances.

Perform tests of
Complete the
controls and
Phase II Phase IV audit and issue
substantive tests
an audit report.
of transactions.

LO 1
 Financial Statements Cycles

General
cash

Capital acquisition
and repayment cycle

Sales and Acquisition Payroll and

collection and payment personnel
cycle cycle cycle

Inventory and
warehousing
cycle
 Learning Objective 1

Identify the major types of cash and financial

instruments accounts maintained by
business entities.

Type of Cash Accounts
Learning Objective 1
Identify the major types of
cash and financial instruments
accounts maintained by
business entities

 General cash account

 Imprest accounts
 Branch bank account
 Imprest petty cash fund
 Cash equivalents

LO 1

Relationship of General Cash to
Other Cash Accounts
Learning Objective 1
Identify the major types of
cash and financial instruments
accounts maintained by
business entities
LO 1
 Learning Objective 2

Show the relationship of cash in the bank to

the various transaction cycles.
 Learning Objective 2
Relationships of Cash in the Bank Show the relationship of

and Transaction Cycles

cash in the bank to the
various transaction cycles.

LO 2
 Learning Objective 2
Cash in the Bank and Transaction Show the relationship of
cash in the bank to the
Cycles various transaction cycles.

Misstatements which may not be discovered

as a part of the audit of the bank reconciliation:

 Failure to bill a customer

 An embezzlement of cash receipts from
customers
 Duplicate payments
 Improper payments of personal expenses
 Payment for raw materials not received
 Payment to employee for hours not worked
 Payment of excessive interest to related party

LO 2
 Learning Objective 2
Cash in the Bank and Transaction Show the relationship of

Cycles
cash in the bank to the
various transaction cycles

Misstatements which are normally discovered

as a part of the tests of a bank reconciliation:

• Failure to include a check on the outstanding check list

• Cash received by the client recorded in the wrong period
• Deposits recorded near year end, deposited in the bank in the
same month, and included in the bank reconciliation as a deposit
in transit
• Payments on notes payable debited directly to the bank balance
but not entered in the client’s records

LO 2
 Learning Objective 3

Design and perform audit tests of the

general cash accounts.
 Learning Objective 3
Methodology for Designing Tests Design and perform audit
tests of the general cash
of Balances for Cash in the Bank accounts

Identify client business risks Design and perform analytical

affecting cash in bank. procedures for cash in bank
balance.
Set tolerable misstatement and
assess inherent risk for cash
in bank. Design tests of details of cash
in bank balance to satisfy
balance-related audit objectives.
Assess control risk for cash in
bank. Audit procedures
Sample size
Items to select
Design and perform tests of
controls and substantive tests Timing
of transactions several cycles.

LO 3
 Learning Objective 3
Balance-related Audit Objectives Design and perform audit
tests of the general cash
accounts

Detail tie-in

Cash
Balance-related Cutoff
Existence
Audit
Objectives

Completeness Accuracy

LO 3
 Learning Objective 3
Procedures Design and perform audit
tests of the general cash
accounts

Bank Bank
Confirmation Reconciliation

Cutoff
Bank
Statement

LO 3
 Learning Objective 3
Audit Schedule for a Bank Design and perform audit
tests of the general cash
Reconciliation accounts

LO 3
Types of Audit Tests Used for Learning Objective 3
Design and perform audit

General Cash in Bank tests of the general cash

accounts

LO 3
 Learning Objective 4

Recognize when to extend audit tests of the

general cash account to test further for
material fraud.

Fraud-oriented Procedures
Learning Objective 4
Recognize when to extend
audit tests of the general
cash account to test further
for material fraud

The auditor must extend the procedures

in the audit of year-end cash to determine
the possibility of a material fraud.

LO 4

Extended Tests of the Bank
Reconciliation
Learning Objective 4
Recognize when to extend
audit tests of the general
cash account to test further
for material fraud

When the auditor believes that the

year-end bank reconciliation may
be intentionally misstated, it is
appropriate to perform extended
tests of the year-end bank
reconciliation.

LO 4
 Learning Objective 4
Recognize when to extend
Proof of Cash audit tests of the general
cash account to test further
for material fraud

 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

LO 4
 Learning Objective 4
Recognize when to extend
Proof of Cash audit tests of the general
cash account to test further
for material fraud

Includes the following reconciliation tasks:

1. The balance on the bank statement with the general

ledger balance at the beginning of the proof-of-cash
period
2. Cash receipts deposited per the bank with the cash
receipts journal for a given period
3. Cancelled checks clearing the bank with those
recorded in the cash disbursements journal for a given
period
4. The balance on the bank statement with the general
ledger balance at the end of the proof-of-cash period

LO 4
 Learning Objective 4
Recognize when to extend
Proof of Cash Schedule audit tests of the general
cash account to test further
for material fraud

LO 4
 Learning Objective 4
Recognize when to extend
Interbank Transfer audit tests of the general
cash account to test further
for material fraud

The accuracy of the information on the

interbank transfer schedule should be verified.

The interbank transfers must be recorded in

both the receiving and disbursing banks.

The date of the recording of the disbursements

and receipts for each transfer must be in
the same fiscal year.

LO 4
 Learning Objective 4
Recognize when to extend
Interbank Transfer audit tests of the general
cash account to test further
for material fraud

Disbursements on the interbank transfer

schedule should be correctly included in or
excluded from year-end bank reconciliation
as outstanding checks.

Receipts on the interbank transfer schedule

should be correctly included in or excluded
from year-end bank reconciliations as
deposits in transit.

LO 4

Interbank Transfer Schedule
Learning Objective 4
Recognize when to extend
audit tests of the general
cash account to test further
for material fraud
LO 4
 Learning Objective 5

Design and perform audit tests of financial

instruments accounts.
 Learning Objective 5
Design and perform audit
Objectives tests of financial
instruments accounts

 To evaluate whether the financial instruments

accounts, as stated on the balance sheet, are
fairly stated and properly disclosed in
accordance with all eight-balance related audit
objectives:
 Existence  Cutoff
 Completeness  Detail tie-in
 Accuracy  Realizable value
 Classification  Rights

LO 5
 Learning Objective 5
Methodology for Designing Tests Design and perform
audit tests of financial
of Balances for Financial Instruments instruments accounts

Identify client business risks

affecting financial Design and perform analytical
instruments. procedures for financial
instruments.
Set performance materiality
and assess inherent risks for
financial instruments. Design tests of details of
financial instruments to satisfy
balance-related audit objectives.
Assess control risk for
financial instruments. Audit procedures
Sample size
Items to select
Design and perform tests of
controls and substantive tests Timing
of transactions several cycles.

LO 5
 Learning Objective 5
Tests of Details of Financial Instruments Design and perform
audit tests of financial
Balances instruments accounts

 Obtain a schedule of investment activity

 Confirmation from the broker-dealer
 Examine contracts for embedded derivatives
 Read minutes from BoD meetings
 Observe market prices

LO 5
> DO IT!

Baca dan Kerjakan Buku Praktikum Audit karangan

Sukrisno Agoes dan Estralita Trisnawati, Edisi 3.
 Bagian III: Permasalahan
 Modul 6: Siklus Perolehan dan Pembayaran Investasi
 Modul 4: Kas dan Setara Kas
Pertanyaan?

SELESAI