Group 3 BSA – IV February 5, 2021

Auditing Problem

Audit of Cash and Cash Equivalent

Existence or Occurrence

 Audit Objective
o To determine whether cash exists at year-end and cash related transactions occur with
the year.
o To determine that all cash balances of the client are reflected on the balance sheet at
year end.
 Audit Procedure
o Obtain analysis of cash balance and reconcile to the general ledger.
o Confirmation bank balances as of balance sheet date.
o Perform cash account procedure for cash on hand.
o Prepare bank reconciliation as of the balance sheet date.
o Trace all transfers occurring between banks near year-end.

Completeness

 Audit objectives
o To determine whether all cash transaction are recorded in the proper accounting
period.
 Audit Procedure
o Obtain a Cutoff bank statement containing transactions several days subsequent to the
balance sheet date. Examine items returned with the cutoff bank statements.
o Prepare proof of cash and reconcile cash transactions occurring during a specified
period as they are recorded by the bank and the client.
o Verify the client’s cutoff of cash receipts and cash disbursement

Rights and obligations

 Audit objectives
o To determine that cash balances are available for use without restrictions or if with
restrictions, properly indicated in the balance sheet.
 Audit procedure
o Review bank statement and the bank replies to confirmation letters.
Valuation or Allocation

 Audit objectives
o To determine if cash is recorded and presented at the proper amount
 Audit Procedure
o Verify existence of cash in banks under receivership, cash subject to court’s restraining
order, in foreign banks and in foreign currency. This is in addition to the foregoing
procedures which will enable the auditor to verify proper valuation of cash.

Presentation and Disclosure

 Audit objectives
o To determine whether cash is presented in accordance with generally accepted
accounting principle.
 Audit Procedure
o Investigate any checks representing large or unusual payments to related parties
o Evaluate proper financial statement presentation and disclosure of cash.
1.

Proper composition of the fund

Currency (Bills and Coins) 22,000
Cash checks 5,000
Voucher 7,400
NSF checks 2,600
Total 37,000
Less: Petty Cah Receipt Voucher
Return of expense advance 2,000
Sale of Money Order 1,000 3,000
Balance of Fund per Count 34,000
Balance of Fund per Records 50,000
Shortage -16,000

2. Audit procedure

Cash checks

1. Examine checks as to payee, date, endorsements and subsequent deposit.

2. Determine if checks were cashed with prior approval of a responsible official.

Vouchers not yet replenish

1. Voucher supporting documents, invoices, etc.

2. Examine voucher as to approval by authorized officilas, signature of payee, etc.

NSF checks

1. Determine reason why NSF checks are still on hand.

2. Confirm directly with drawers

Return of excess travel advance

1. Examine liquidation of travel advance as reported and determine accuracy of the amount
returned.
2. Vouch supporting invoices.

Sale of money orders

1. Examine latest report of the Pampanga Company to establish proper accountability.

2. Confirm directly with the Pampanga Company all unreported money orders sold as well as
unissued as of November 10.

Vouchers subsequently presented

1. Examine vouchers as to date, approval, amount and nature of expenditures.

2. Confirm directly with employees those items representing wage advance.
Book balance of the Petty Cash Fund

1. Trace to the general ledger the balance of the fund.