SAMPLE AUDIT PROGRAM FOR CASH IN BANK

I. Audit Objectives:

A. Determine that cash recorded in books exists and is owned by the company (Existence).

B. Determine that cash transactions are recorded in the correct ac­counting period, i.e., that there is a proper cut-off of cash receipts and disbursements (Completeness).

C. Determine that balance sheet amounts include items in transit as well as cash on deposit with third parties (Completeness).

D. Determine that cash is properly classified in the balance sheet and that relevant disclosures are presented in the financial statement notes (Presentation and Disclosure).

II. Procedures:

A. With respect to the bank reconciliations prepared by accounting personnel:

  • Trace book balances to general ledger control totals;

  • Compare ending balances per the bank statements to the ending balances on the bank reconciliation;

  • Verify the mathematical and clerical accuracy including checking extensions;

  • Identify unusual reconciling items and obtain documentation to corroborate the validity of such items. Note: The current file of an auditor`s audit documentation includes all working papers applicable to the current year under audit;

  • Trace deposits in transit and outstanding checks to subsequent months` bank statements which are intercepted before accounting personnel have access to them;

  • Inspect canceled checks for dates of cancellation in order to identify checks which were not recorded in the proper accounting period;

  • Ascertain that checks listed as outstanding are in fact: (1) re­corded in the proper time period, and (2) checks that have not cleared. Scrutinize data when outstanding checks have cleared to see if the books have been held open to improve ratios;

  • Identify and investigate checks that are: (1) above limits pre­scribed by management, (2) drawn to "bearer," and (3) drawn pay­able to cash;

  • Inquire about checks which have been outstanding for a more than reasonable time period;

  • If balances have been confirmed with banks, compare confirmed balances with bank balances per the year-end bank statements.

B. With respect to listings of cash investments:

  • Trace book balances to general ledger control accounts;

  • Verify the accuracy of all extensions and footings;

  • Consider confirming balances directly with bank personnel;

  • Obtain and inspect passbooks and certificates of deposit;

  • Recalculate income derived from cash investments and trace the income amounts to the books of original entry. Also, reconcile for reasonableness interest revenue amounts to the amount of cash investments;

  • Consider using a custodian to maintain physical custody for safe­keeping and to guard against forgeries.

C. Prepare a bank transfer schedule which identifies:

  • Name of disbursing bank;

  • Check number;

  • Dollar amount;

  • Date disbursement is recorded in books;

  • Name of receiving bank;

  • Date receipt is recorded in books;

  • Date receipt is recorded by bank.

D. Perform cut-off test wherein transactions for the last few days of the year and the first few days of the next year are scrutinized.

E. Inspect bank statements in order to identify obvious erasures or alterations.

F. Inspect debit and credit memos and trace them to the bank statements.

G. Read financial statements and investment certificates for appropriate classification of cash balances.

H. With respect to cash on hand (i.e., petty cash funds):

  • Determine the identity of all funds;

  • Select funds to be counted and list currency and coins by denomi­nation; account for vouchers, stamps, and checks; trace fund balances to general ledger control accounts.

I. Investigate the reasons for delays in deposits.

J. Note unusual activity in inactive accounts since it may be indicative of cash being hidden.

K. In a cash-basis entity, reconcile sales with cash receipts.

L. List unusual cash receipts (e.g., currency receipts).

M. Examine third party endorsements by reviewing canceled checks.

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