Chapter 23 Instructor's Guide

Chapter 23 - Chapter 23 Audit of Cash Balances This is one chapter we always cover For one reason it ties the various transaction cycles together

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Chapter 23 Audit of Cash Balances This is one chapter we always cover. For one reason, it ties the various transaction cycles together. Secondly, students will frequently do work in this area early in their professional careers. Students are told that there will be reasonably heavy testing of their knowledge of bank reconciliations and proofs of cash on the next exam. The following are the major subjects covered in this session: Chapter opening vignette Cash in the bank and transaction cycles Types of cash accounts Effect of proper segregation of duties and an independent bank reconciliation Definitions Audit of the general cash account Cutoff tests Summary of audit tests for the general cash account Proof of cash Audit of an imprest account – payroll Chapter Opening Vignette “Society Expects a Lot from Auditors” Like the vignette at the beginning of Chapter 10, this vignette illustrates a large defalcation. In this case, the auditors apparently complied with auditing standards, but missed the fraud. The technical issue that was the focus of the resulting trial was whether the auditors should have done more testing of internal control. This case provides a basis for a discussion of a substantive procedures approach versus an internal control reliance audit approach on small clients. It provides an opportunity to highlight the importance of obtaining an understanding of internal control in every audit, which involves assessing the design and implementation of controls. A heavy focus on substantive testing is less likely to uncover a defalcation than an internal control reliance approach where more tests of controls and substantive tests of transactions are performed. The vignette also illustrates the typical litigation format for accountants’ malpractice suits where two auditing "experts" contradict each other and the jury is left to sort out who is more believable. This can lead to a discussion about whether lay jury members can be expected to understand technical accounting and auditing
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This note was uploaded on 01/23/2010 for the course ACCOUNTING auditing taught by Professor Pro-abuel-ezz during the Spring '10 term at Cairo University.

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Chapter 23 - Chapter 23 Audit of Cash Balances This is one chapter we always cover For one reason it ties the various transaction cycles together

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