CASH RECEIPTS TRANSACTIONS
TESTS OF CONTROLS (IWORI)
Controls
1. A trustworthy employee prepares a
prelisting of cash receipts before
further processing.
2. A validated deposit slip is obtained
for daily deposits and compared to
the cash receipts summary.
3. Duties of handling cash receipts are
segregated from posting to
accounts receivable.
4. A bank reconciliation is prepared
monthly by a person not involved in
handling cash, accounts receivable,
or general ledger records.
5.Prelisting of cash receipts and cash
register procedures are monitored.
6.Checks are restrictively indorsed
upon receipt.
7.Cash receipts are deposited intact
daily.
Potential
Misstatements
Cash receipts may be
misappropriated.
Cash receipts may be recorded that
were not deposited.
Cash receipts may be misappropriated
and lapping may occur.
Bank reconciliations may cover
shortages.
Cash may be misappropriated.
Cash may be misappropriated.
Cash may be unrecorded or
misappropriated.
Audit Procedures Test
of Controls
Observe whether a prelisting is
prepared and inquire of preparer
about the procedures followed.
For sample of entries in the cash
receipts journal, reconcile the total to
validated deposit tickets.
Observe separation of duties and
inquire of personnel about their
responsibilities.
Examine bank reconciliations and
determine that preparer does not
have a conflicting duties.
Observe monitoring and inquire of
prelister and cash register operator
about procedures.
Examine deposited checks for
endorsement.
Observe procedure and inquire of
personnel who perform the
procedure.
SUBSTANTIVE TESTS (VICTORIA)
ASSERTIONS Substantive test of transactions Substantive test of details of balances Analytical Procedures
Potential Substantive Audit Substantive Audit
Assertions Analytical Procedures
Misstatements Procedures Procedures
Fictitious cash receipts may be For a sample of entries in cash Cash recorded on the books exist. 1. Count cash on hand. Analytical procedures are not used extensively in auditing cash.
recorded. receipts journal, trace to the prelisting
of cash receipts and to remittance 2. Confirm bank balances. Auditors compare actual cash balances to budgeted cash balances to identify
advice. For a sample of entries, variations that merit investigation. A reasonable relationship between the
reconcile daily deposit to validated 3. Examine interbank transfers for the budgeted cash balance and the recorded cash balance provides evidence about
deposit ticket. last five days of the current period the existence of cash.
Existence/ and the first five days of the new
period. Comparing the monthly cash balances during the period with those of the
Occurrence previous period also may identify variations that should be investigated.
4. Perform analytical procedures.
Recorded receipts represent actual
collection from customers.
Cash may be misappropriated. For a sample of days, verify that all All of the entity’s cash is included. 5. Perform cash cutoff test.
cash receipts are recorded by
reconciling daily listing(s) of cash 6. Prepare a proof of cash.
Completeness receipts and validated deposit ticket
to cash receipts journal.
All receipts are processed and
recorded.
8.A daily cash summary is prepared Cash may be misappropriated. For selected day, trace totals from
and reconciled to total of prelisting receipts journal to cash summary and
and over-the-counter receipts and validated deposit ticket.
the cash receipts journal.

9.The cash receipts journal total is Credits posted to customers’ accounts Observe procedure and inquire of
independently reconciled to the may be overstated or understated. personnel who perform the
total posted to accounts receivable. procedure.

Any restrictions on cash have been 7. Examine standard bank

identified. confirmations and read the
Rights minutes of the board of directors’
& obligations meetings to determine whether
any restrictions have been placed
on cash.

10. Cash receipts are recorded at the
amount received.
11. A responsible person approves
cash discounts taken.
A customer may be given credit for an
amount greater than payment.
A customer may take a larger discount
than appropriate.
For a sample of entries in cash
receipts journal, examine remittance
advices.
For a sample of entries in cash
receipts journal, examine remittance
advices for approval of discount
taken.
Valuation/
Measurement
Debits to cash and credits to
accounts receivable are valued at
amounts received.
A customer may be given credit for an
amount greater than actual payment.
For a sample of entries in cash
receipts journal, examine remittance
advice and verify that discount taken
was appropriate. Foot accounts
receivable subsidiary ledger and
reconcile to the general ledger
account .
Cash is correctly valued.
8. Obtain a bank cutoff statements
directly from the bank and use
them to test the bank
reconciliation as of statement of
financial position date.

12. A supervisor approves account
classification made in journalizing.
Entries may be made to wrong Observe procedure. Entries may be made to wrong Review account coding for a sample of Cash is presented and disclosed 9. Review the FS and perform
accounts. Examine approvals by supervisor.
Presentation accounts. entries in the cash receipts journal. properly. analytical procedures to determine
& disclosure whether accounts are classified
and disclosed in accordance with
Cash receipts transactions are PFRS.
recorded to result in accordance with
PFRS.