Chapter 23 Audit of Cash Balances Pages 315-330

Revenue & Collection Transaction cycle credit sales accounts receivable x.xx sales x.xx cash receipts cash x.xx accounts rec x.xx

significant classes of Transactions “credit sales” accounts receivable x.xx sales x.xx “cash receipts” cash x.xx accounts rec x.xx

Levi What is an imprest payroll account ?

cash equivalents an original maturity date of less than 90 days savings accounts – time deposits certificates of deposit money market funds

COSO components of internal controls Control environment Risk assessment Control activities Information and communication Monitoring

Control Activities Control Activities Adequate separation of duties Proper authorization of transactions and activities Adequate documents and records Physical control over assets and records Independent checks on performance

Mackenzie what responsibilities need to be separated to have adequate “segregation of duties” ?

Separation of Duties p 166 authorization of transactions from the custody of related assets custody of assets from accounting operational responsibility from record-keeping responsibility IT duties from user departments

Separation of Duties authorization of transaction custody of assets involved in transaction Accounting (record-keeping) for the transaction reconciliation of assets to accounting records

Separation of Duties p 320 Bank reconciliation by someone who does not handle cash receipts custody of assets record cash receipts accounting / record-keeping approve check requests authorize transactions Write checks custody of assets record disbursements accounting / record-keeping

Adequate documents & records Pre numbered checks

Priya What is the objective of AU-C section 500?

AU-C 500 Audit Evidence .04 The objective of the auditor is to design and perform audit procedures that enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor's opinion.

Garren Describe a cutoff bank statement?

Jordan Describe a Bank Confirmation What information is on a bank confirmation?

Peter Who must request the bank to send a bank confirmation to the auditor ? Who must sign the request for the bank confirmation?

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Algernon what distinguishes fraud from errors ?

fraud Intentional Knowingly making material misrepresentations with the intent of inducing someone to believe the falsehood and act upon it and, thus suffer a loss or damage.

significant classes of Transactions “credit sales” accounts receivable x.xx sales x.xx “cash receipts” cash x.xx accounts rec x.xx

auditing account balances

auditing transaction cycles

proof of cash (page 329)

schedule of transfers handout

Bank transfer schedule handout

transfer schedule (handout) 1st Parent writes check 2nd check clears Parent’s bank Sub receives check 4th 3rd check clears Sub’s bank

Meredith handout Does check 4100 result in a $50,000 overstatement OK understatement

1st 2nd 3rd 4th check 4100 12/31 12/31 1/2 1/3 date in CD Jnl Parent writes check 2nd date in Sub’s CR Jnl 3rd date check cleared Sub’s bank 4th date check cleared Parent’s bank 12/31 12/31 1/2 1/3

consolidated cash is correct

David deposit in transit on the Sub’s bank reconciliation How would these items show up on the bank reconciliation? outstanding check on the Parent’s bank reconciliation deposit in transit on the Sub’s bank reconciliation

Jeanette handout Does check 4275 result in a $10,000 overstatement OK understatement

1st 2nd 3rd 4th check 4275 12/31 1/2 1/2 1/4 date in CD Jnl Parent writes check 2nd date in Sub’s CR Jnl 3rd date check cleared Sub’s bank 4th date check cleared Parent’s bank 12/31 1/2 1/2 1/4

consolidated cash understated by $10,000

Julia it would not appear on the Sub’s bank reconciliation How would these items show up on the bank reconciliations? outstanding check on the Parent’s bank reconciliation it would not appear on the Sub’s bank reconciliation

Joseph handout Does check 4280 result in a $20,000 overstatement OK understatement

1st 2nd 3rd 4th check 4280 1/2 12/31 12/31 1/2 date in CD Jnl Parent writes check 2nd date in Sub’s CR Jnl 3rd date check cleared Sub’s bank 4th date check cleared Parent’s bank 1/2 12/31 12/31 1/2

consolidated cash overstated by $20,000

Melissa it would not appear on the Sub’s bank reconciliation How would these items show up on the bank reconciliations? it would not appear on the Parent’s bank reconciliation it would not appear on the Sub’s bank reconciliation

5 points if you get it correct -2 points if you get it wrong handout Does check B403 result in a $5,000 overstatement OK understatement

1st 2nd 3rd 4th check B403 1/2 1/3 12/31 1/3 date in CD Jnl Parent writes check 2nd date in Sub’s CR Jnl 3rd date check cleared Sub’s bank 4th date check cleared Parent’s bank 1/2 1/3 12/31 1/3

The subsidiary actually has $5,000 less in their checking account than they show in their G.L. B403 is an attempt to conceal the shortage. Depositing the $5,000 in the Sub’s bank account on 12/31/14 but not recording the deposit in the books until 1/2/15 would enable the Sub to reconcile their Bank Statement

Cash Receipts

Jo Ellen If you are concerned about the occurrence assertion for cash receipts during the year would you Vouch from CR Jnl to supporting evidence OR Trace a sample of cash receipts from mailroom remittance list into CR Jnl

Pei For occurrence of cash receipts Vouch from CR Jnl to supporting evidence IF you find an entry in the CR Jnl for which there is no supporting evidence Would Cash Receipts be over or under stated

would you Vouch from CR Jnl to supporting evidence OR Emily If you are concerned about the completeness assertion for cash receipts during the year would you Vouch from CR Jnl to supporting evidence OR Trace a sample of cash receipts from the mailroom remittance list into the CR Jnl

Cody For completeness Trace a sample of cash receipts from the mailroom remittance list into the CR Jnl If you find evidence of a CR in the mailroom for which there was no entry in the CR Jnl Would Cash Receipts be over or under stated

Cash Disbursements

cash disbursements at Year End Bart With regard to the occurrence of cash disbursements at Year End Would you Vouch from the 2014 CD Jnl to the bank statement or Trace a sample of checks on the 12/31/14 bank statement into the CD Jnl

Vouch from 2014 CD Jnl to the bank statement John With regard to the occurrence of cash disbursements Vouch from 2014 CD Jnl to the bank statement If you find an entry in the 2014 CD Jnl for which there is no evidence of an underlying check Would Cash Disburse be over or under stated?

Jeff Vouch from 2014 CD Jnl to the bank statement With regard to the occurrence of cash disbursements Vouch from 2014 CD Jnl to the bank statement If you find an entry in the 2014 CD Jnl for which there is no evidence of an underlying check Would ”Cash” be over or under stated

Juancarlos With regard to the completeness of cash disbursements Would you Vouch from the 2014 CD Jnl to cancelled checks on the bank statement or Trace a sample of checks from the 12/31/14 bank statement into the CD Jnl

Levi For completeness of cash disbursements Trace a sample of checks from the 12/31/14 bank statement into the 2014 CD Jnl If you are unable to trace a check that appears on the 12/31/14 bank statement into the 2014 CD Jnl Would Cash Disburse be over or under stated

Mackenzie For completeness of cash disbursements Trace a sample of checks into the CD Jnl If you are unable to trace a check that appears on the bank statement into the CD Jnl Would “Cash” be over or under stated

cut-off at 12/31/2014

Priya cash receipts are you going to audit the last 25 entries in the Cash Receipts Jnl prior to 12/31/14 or the first 25 entries in the Cash Receipts Jnl after 1/1/15

Garren cash receipts - will you Vouch or Trace ?

Jordan cash receipts with which financial statement assertion are you concerned if we are auditing cash receipts at 12/31/14?

Peter cash receipts what evidence is provided if we audit the last 25 entries in the Cash Receipts Journal prior to 12/31/14?

Algernon cash disbursements audit the last 25 checks in the Cash Disbursements Jnl prior to 12/31/14 or the first 25 checks in the Cash Disbursements Jnl after 1/1/15

Meredith cash disbursements with which financial statement assertion are we concerned if we are auditing cash disbursements at 12/31/14 ?

Jeanette You are concerned about cash being overstated With regard to the of cash disbursements You are auditing the first 25 entries in the January 2015 Cash Disbursements Journal will you Vouch or Trace

Vouch from the CD Jnl to cancelled checks on the bank statement

David If you vouch a check that appears in the 2015 CD Jnl into the 12/31/14 bank statement Would Cash Disburse be over or under stated

Julia If you vouch a check that appears in the 2015 CD Jnl into the 12/31/14 bank statement Would “Cash” be over or under stated

Joseph what evidence is provided if we audit the first 25 checks dated after 1/1/2015 ?