Audit & Assurance

Abdullah Al Mahmud MD. Kayes FCCA,CISA

Contact: 01717-151413
E-mail: mahmudkayes86@gmail.com
 The audit of Cash and Bank
BANK
The amount of cash at bank and/or bank overdraft is one of the most straightforward balances in the
statement of financial position to audit.

Bank balances are usually confirmed directly with the bank in question.

The auditor will send a confirmation request letter to client’s bank to obtain a 'bank report for audit
purposes' ('bank certificate'). The bank certificate will certify the amounts in the various accounts of the
client and it should also tell the auditor about any security which the bank has for overdrafts and for
loans, together with details of any assets which the bank is holding on behalf of the client, such as share
certificates. It should also show any accrued interest or bank charges.

The auditor will make sure that the amount in the client’s cash book agrees with the amount on the
statement of financial position.

To confirm Completeness, Valuation, Existence, cut-off and assertions related to disclosure the auditor
shall perform the following substantive procedures:

 Obtain standard bank confirmations from each bank with which the client conducted business
during the audit period.
 Reperform arithmetic of bank reconciliation
 Trace cheques shown as outstanding from the bank reconciliation to the cash book prior to the
year-end and to the after-date bank statements and obtain explanations for any large or
unusual items not cleared at the time of the audit.
 Compare cash book(s) and bank statements in detail for the last month of the year, and match
items outstanding at the reconciliation date to bank statements.
 Review bank reconciliation previous to the year-end bank reconciliation and test whether all
items are cleared in the last period or taken forward to the year-end bank reconciliation.
 Obtain satisfactory explanations for all items in the cash book which are missing in the bank
statement and discuss with finance staff.
 Verify contra items appearing in the cash books or bank statements with original entry.
 Verify balances per the cash book according to the bank reconciliation by inspecting cash book,
bank statements and general ledger.
 Verify the bank balances with reply to standard bank letter and with the bank statements
 Inspect the cash book and bank statements before and after the year-end for exceptional
entries
 Consider whether there is a legal right of set-off of overdrafts against positive bank balances.
 Review draft accounts to ensure that disclosures for bank are complete and accurate and in
accordance with accounting standards.

MD. Kayes ACCA,CISA Email: mahmudkayes86@gmail.com 2

Cash
If the client has a material amount of physical cash, for example if the client runs a chain of shops each
with a cash float, then at least some cash counts will be carried out to confirm the existence and
accuracy of the cash balance at the reporting date.

Even if balances are not material, the auditor may routinely count cash because of the relatively high
risk of theft. Where petty cash/a float is controlled using an imprest system (i.e. cash + authorized
vouchers = imprest balance), the auditor may carry out tests of controls on the authorization of
vouchers and replenishment of the float during an interim audit.

MD. Kayes ACCA,CISA Email: mahmudkayes86@gmail.com 3