Audit of Cash and

Cash Equivalents
(Part 2)
IMPORTANT NOTES on Audit of Cash and CEs
- Assertions: Existence, Completeness, Valuation and Allocation, Rights and
Obligations, Presentation and Disclosure
- Identify all cash held by entity and by others (ex. A bank) at a given
reporting period.
- All cash owned by the entity are included on the Statement of Financial
Position
- Cash is stated at reasonable value and with supporting schedules.
- Legal right and unrestricted use
- Proper classification, description and disclosure
- When confirming cash in bank, materiality of account balance is not a
consideration.
- Include in the audit the bank accounts that have been closed during the
period
- Cash count must be surprised and in the presence of the custodian
IMPORTANT NOTES on Audit of Cash and CEs
- On checking bank reconciliation of client, focus on the items that may be
omitted to conceal cash shortage or misappropriation (normally the
outstanding checks)
- Check the long-outstanding checks
- Focus on large or unusual transactions (ex. Checks payable to directors,
officers)
- Kiting – concealing of cash shortage by taking advantage of the clearing
period of checks
- Window dressing scheme
- Compare with prior periods and investigate unexpected changes