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18 Cards in this Set
- Front
- Back
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What are the major types of cash accounts? |
1)General Cash account 2) Imprest Accounts 3) Branch Bank Account 4) Imprest petty cash fund 5) Financial instruments. |
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What is the General Cash Account
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Is the focal point of cash for most organizations because virtually all cash receipts and disbursements flow through this account
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All but which two cycles affect cash in bank? |
1) Inventory 2) Warehousing page 154 |
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Which five balance related audit objectives need to be met at the year end tests of the general cash account? |
1) Existence 2) completeness 3) accuracy, 4) cutoff 5) detail tie in {Rights to general cash, classification, and realizable value are usually not of concern} |
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Reconciliations must likely will not detect these misstatements: |
1) Failure to bill customer 2) Embezzlement by intercepting cash before they're recorded and charging it off as bad debt 3) Duplicate payment of a vendors invoices 4) Improper payment of officers personal expenditures 5) Payment of raw materials that were not received 6) Payment to an employee for more hours than he or she worked 7) Payment of interest to a related party for an amount in excess of the going rate |
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The Cash balance in an audit is usually not material what about the general cash account is of concern? |
So many transactions flow through the general cash account so although the balance is relatively small a lot of transactions could have been made in error. |
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Because cash is more susceptible to theft than other assets, there is high inherent risk for which three particular balance related audit objectives? |
1 existence 2 completeness 3 accuracy. |
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Internal controls over year-end cash balances in the general account can be divided into two categories? |
1) controls over transaction cycles affecting the recording of cash receipts and disbursements 2) Independent bank reconciliations. |
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Are bank confirmations required under auditing standards? |
NO, however auditors usually obtain a direct receipt of a confirmation from every bank or other financial institution |
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Imprest Petty Cash Fund: |
Not a bank account, but a preset amount of cash kept on hand for incidental expenses. ( You make a journal entry when you replenish petty cash) debit to various expense accounts credit to cash |
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Imprest accounts |
Many companies establish a separate account for payroll to improve internal control over payroll disbursements. |
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General Cash Account |
form most organizations virtually all cash receipts and disbursements flows through this account |
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Test of the bank reconciliation often identify these misstatements: |
1)Failure to include a check that has not cleared the bank on the outstanding check list, even though it has been recorded in the cash disbursements. 2) Cash received by the client subsequent to the balance sheet date but recorded as cash receipts in the current year 3)Deposits recorded as cash receipts near the end of the year. deposited in the bank in the same month, and included in the bank reconciliation as a deposit in transit 4) Payments on notes payable debited directly to the bank balance by the bank but not entered into the clients records |
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What are three procedures important to the audit of cash in the bank? |
1) Receipt of a Bank Confirmation 2) Accessing Cutoff Bank Activity after Year-End 3) Tests of the Bank Reconciliation |
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Proof of Cash If the client has a material internal control weakness, the auditor may prepare a proof of cash to determine the following four things |
1) All recorded cash receipts were deposited 2) All deposits in the bank were recorded in the accounting records 3) All recorded cash disbursements were paid by the bank 4) All amounts that were paid by the bank were recorded |
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Kitting |
This involves transferring money from one bank to another and incorrectly recording the transactions. |
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Why is cutoff statement so reliable? |
its provide directly from bank slide 23-9) |
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What is done to detect or prevent kitting? |
Tests of inter-bank transfers[ auditors list all inter-bank transfers near the balance sheet date and tract to the accounting records for proper recording |
