Audit of Cash and Cash

Equivalents
BSA 222 AUDITING AND ASSURANCE CONCEPTS & APPLICATIONS
Management Assertions
Assertions about classes of transactions and events for the
period under audit

1. OCCURRENCE
2. COMPLETENESS
3. ACCURACY
4. CUTOFF
5. CLASSIFICATION
Management Assertions
Assertions about account balances at the period
end.

1. EXISTENCE
2. RIGHTS AND OBLIGATIONS
3. COMPLETENESS
4. VALUATION AND ALLOCATION
Management Assertions
Assertions about presentation and disclosure at
the period end.

1. OCCURRENCE AND RIGHTS AND OBLIGATIONS

2. COMPLETENESS
3. CLASSIFICATION AND UNDERSTANDABILITY
4. ACCURACY AND VALUATION
FINANCIAL STATEMENTS
ACCOUNTS
ASSERTIONS
AUDIT OBJECTIVES
AUDIT PROCEDURES
Audit Objectives
When auditing cash and cash equivalents, what
will be the basis for our objectives?

Which management assertions

should we apply?
Audit Program
Unit to be Audited  
Auditor Responsible  
Date of Audit  
I. Audit of Cash and Cash Equivalents
A. Audit Objectives
1)
2)
3)
B. Audit Procedures
Related Assertion Audit Procedure Remarks
Audit Objectives
EXISTENCE Audit of Cash and Cash Equivalents

COMPLETENESS Audit Objectives:

To determine whether:
1. All cash as reported in the SFP as of
VALUATION AND ALLOCATION
December 20xx is held by the entity or by
the bank.
RIGHTS AND OBLIGATIONS
2. All cash that is owned by the entity has been
reported in the SFP.
PRESENTATION AND DISCLOSURE
3. Cash balances is properly valued and agrees
with supporting schedules.
4. The entity owns or has legal right to all the
cash reported in the SFP.
5. Cash is properly classified, described, and
disclosed in the SFP, including in the notes.
Audit Procedures
What will be our basis for the
audit procedures?
Audit Procedures
1. Bank confirmations
2. Cash counts
3. Test on bank reconciliation, proof of cash
4. Testing bank transfers
5. Cash cut-off tests
6. Cash valuation
7. Analytical Procedures
Audit Procedures
Related Assertion Audit Procedure Remarks
Audit Program
Unit to be Audited  Treasury Department
Auditor Responsible  Ms. Trish Shorer
Date of Audit  April 3, 2023

I. Audit of Cash and Cash Equivalents

A. Audit Objectives
To determine whether:
1) All cash as reported in the SFP as of December 20xx is held by the entity or by the bank.
2) All cash that is owned by the entity has been reported in the SFP.
3) Cash balances is properly valued and agrees with supporting schedules.
4) The entity owns or has legal right to all the cash reported in the SFP.
5) Cash is properly classified, described, and disclosed in the SFP, including in the notes.

B. Audit Procedures
Related Assertion
Existence, Valuation
Existence, Completeness
Completeness
Rights and obligations,
Presentation & Disclosure
Date
Audit Procedure Remarks
Conducted
1. Send bank confirmations.
2. Conduct surprise cash counts.
3. Obtain and test bank reconciliation. Prepare proof of cash.
4. Trace bank transfers
Audit Procedures
1. Establish the cash and cash equivalents balance.
In connection with your audit of Caloocan Corp, you gathered the following:
Current account – MBTC P2,000,000 Credit memo from a vendor for a purchase return P 20,000

Current account – BPI P(100,000) Traveler’s check P50,000

Payroll account P500,000 Non-sufficient funds check P15,000

Foreign bank account – restricted P1,000,000 Money order P30,000

Petty cash fund (P4,000 in currency and expense

Postage stamps P1,000
Receipts for P6,000) P10,000
Treasury bills, due 3/30/22
Employee’s post-dated check P4,000
(purchased 12/29/21) P200,000
Treasury bills, due 1/31/22
IOU from controller’s sister P10,000
(purchased 2/1/21) P300,000
Audit Procedures
2. Determine the adjusted balances of cash accounts.
You were able to gather the following from the December 31, 2021 trial balance of Mandaluyong Corp in
connection with your audit of the company.
 Petty cash fund totaling P10,100 consisted of the following items as of December 31,
Cash on hand P500,000 2021. Bills and coins, P2,000; Employee’s vales, P1,600; Currency in an envelop
Petty cash fund 10,000 marked *collections for charity* with names attached, P1,200; Unreplenished petty cash
BPI current account 1,000,000 vouchers, P1,300; Check drawn by Mandaluyong, payable to petty cashier, P4,000
Security Bank Acct #1 1,080,000  Included among checks drawn by Mandaluyong Corp against BPI current account and
Security Bank Acct #2 (80,000) recorded in December 2021 are the ff:
a. Check written and dated Dec 29 and delivered to payee on Jan 2, P80,000
PNB savings account 1,200,000
b. Check written on Dec 27, dated Jan 2, delivered to payee on Dec 29, P40,000
PNB time deposit 500,000  The credit balance in the Security Bank current account #2 represents checks drawn in
excess of the deposit balance. These checks were still outstanding at Dec 31, 2021.
 Cash on hand includes the following items:  The savings account deposit in PNB has been set aside by the board of directors for
acquisition of new equipment. This account is expected to be disbursed in the next 3
a. customer’s check for P40,000 returned by bank on
months after the end of the reporting period.
December 26, 2021 due to insufficient fund but
subsequently redeposited and cleared by the bank on Based on the given information and the result of your audit, what is the adjusted
January 8, 2022. balance of a) cash on hand, b) petty cash fund, c) BPI current account and d) cash and
b. Customer’s check for P20,000 dated January 2, 2022, cash equivalents.
received on December 29, 2021.
c. Postal money orders received from customers,
P30,000.
Audit Procedures
3. Prepare proof of cash.
You have assembled the following data for Muntinlupa Co.
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer’s check deposited July 10, returned by bank on July 16
marled NSF, and redeposited immediately; no entry made on books 8,250
for return or redeposit
Collection by bank of company’s notes receivable 71,815 80,900

The bank statements and the company’s cash records these totals:
Disbursements in July per bank statement P218,373
Cash receipts in July per Muntinlupa’s books P236,452

How much is the 1) adjusted cash balance, 2) adjusted bank receipts for July, 3) adjusted book disbursements for July, 4) adjusted cash balance as of July 31, and 5) cash
shorted as of July 31?
Audit Procedures
4. Test bank reconciliation.
The books of Manila’s Service, Inc. disclosed a cash balance of P687,570 on December 31, 2021. The bank statement as of December
31 showed a balance of P547,800. Additional information that you found useful in reconciling the two balances follows:

1. Check number 748 for P30,000 was originally recorded on the books as P45,000.
2. A customer’s note dated September 25 was discounted on October 12. The note was dishonored on December 29 (maturity date).
The bank charged Manila’s account for P142,650, including a protest fee of P2,650.
3. The deposit on December 24 was recorded on the books as P28,950, but it was actually a deposit of P27,000.
4. Outstanding checks totaled P98,850 as of December 31.
5. There were bank service charges for December of P2,100 not yet recorded on the books.
6. Manila’s account had been charged on December 26 for a customer’s NSF check for P12,960.
7. Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
8. Receipts of December 31 for P134,250 were recorded by the bank on January 2.
9. A bank memo stated that a customer’s note for P45,000 and interest of P1,650 had been collected on December 27, and the bank
charged a P360 collection fee.
Required:
Adjusted cash balance ___________________________
Net adjustment to cash as of December 31, 2021 ________________________
Presentation of your bank reconciliation for December 31, 2021.