Chapter 16 Lecture - Student Version(1) - Chapters 16 Auditing the Financing Investing Process for Cash and Investments I Auditing Cash a The line item

Chapter 16 Lecture - Student Version(1) - Chapters 16...

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Chapters 16 – Auditing the Financing / Investing Process for Cash and Investments I. Auditing Cash a. The line item “cash” on the financial statements includes currency on hand and cash in bank accounts (including CDs and savings accounts). i. WP 1-1 – BS and 3-1 – Working TB b. Virtually all accounting transactions pass through the cash account at some point in the process. i. The main source of cash receipts is the revenue process; however, cash can also be received from the sale of PP&E, and from issuing long-term debt or capital stock. ii. The main source of cash disbursements are the purchasing and HRM processes. Cash disbursements can also relate to payments on long-term debt and repurchase of stock. c. Types of Bank Accounts: i. General Cash Accounts– Main cash account 1. Main source of cash receipts: from the revenue process 2. Main source of cash disbursements: from the purchasing and HRM processes ii. Imprest Cash Account – Contains a stipulated amount of money to be used for a specific purpose. 1. Examples: payroll and dividend checks 2. Benefit: minimizes the time required to reconcile the general cash account iii. Branch Accounts – Companies with multiple (branch) locations may have separate bank accounts at local banks to pay for local expenses and establish a relationship with the local community. 1. Can be an imprest account for branch (location) payments or it could serve as a general cash account. 1
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Chapters 16 – Auditing the Financing / Investing Process for Cash and Investments d. Test of Controls for Cash: i. TOCs for cash receipt transactions – covered in Chapter 10 ii. TOCs for cash disbursement transactions – covered in Chapter 11 e. Substantive Procedures for Cash: i. WP 20-2 through 20-4 – Audit Program for Cash ii. Substantive Analytical Procedures for Cash: 1. Generally limited to a comparison of current year balances with prior year balances and a comparison of current year balances with budgeted balances. 2. WP 20-1 – Cash Leadsheet iii. Substantive Tests of Details of Transactions and Balances: 1. Documents used for Test of Details : a. Bank Reconciliation i. WP 20-5 – Bank Reconciliation – Payroll Account ii. WP 20-6 – Bank Reconciliation – General Account b. Standard Bank Confirmation i. WP 20-7 – Standard Bank Confirmation c. Cutoff bank statement – a bank statement that covers the 7- to 10-day period after the date on which the bank account is reconciled. The next month’s bank statement can also be used, if available.
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  • Spring '13
  • Bentz
  • Bank Accounts, Investing Process

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