AUDIT PROGRAM FOR CASH OVERVIEW Test Completeness, Accuracy, Existence and Cutoff Obtain or prepare a comparative summary (1). Account for all bank accounts (2). Test mathematical accuracy of bank reconciliations (3). Trace book balances to the general ledger (4). Scan period-end bank reconciliations (5). Confirm cash balances (6). Test bank reconciliations (7). Test completeness of cash transactions (8). Test mathematical accuracy of cash records (9). Examine bank statements for reconciling items (10). Examine cash records for reconciling items (11). Test transfers between the division's bank accounts (12). Review Restrictions and Related Disclosures Inquire of management about cash restrictions (13). Additional Procedures Count cash on hand (14-15). Consider checks released after period-end (16). AUDIT PROGRAM CASH GUIDANCE The auditor should identify the bank accounts that exist, understand their purpose and determine the monetary volume of transactions flowing through them. When tailoring this program consider and design audit procedures that address relevant presentation and disclosure requirements. There may be circumstances when the auditor wishes to test cash balances at an early date. In these cases, the auditor must keep in mind that cash is a liquid asset and existence and rights of ownership are primary concerns. Therefore division of duties and custody controls must be adequate for this audit testing plan to be appropriate. This audit program assumes period-end substantive tests of cash balances. Test Completeness, Accuracy, Existence and Cutoff OBTAIN OR PREPARE A COMPARATIVE SUMMARY (1). 1. Obtain or prepare a comparative summary of period-end cash balances. Trace totals to the general ledger and the previous audit's working papers. Done by Date ..../../.. ACCOUNT FOR ALL BANK ACCOUNTS (2). 2. Ascertain that all bank accounts are included in the summary; inquire as to why any account on the last audit summary is omitted from the current audit summary. Done by Date ..../../.. TEST MATHEMATICAL ACCURACY OF BANK RECONCILIATIONS (3). 3. Obtain copies of the division's bank reconciliations and test their mathematical accuracy. Done by Date ..../../.. GUIDANCE: Generally it is necessary to obtain and test only the division's period-end bank reconciliations. In some cases it may be appropriate to obtain bank reconciliations for earlier periods and review the proper resolution of unusual reconciling items. This would be appropriate when there is inadequate segregation of duties between persons responsible for reconciling cash accounts, processing cash receipts and disbursements, and approving checks for payment. If the division maintains several bank accounts and controls are adequate, it may be appropriate to select a sample of accounts to review; at least one account should be tested for each bank with which the division does business. TRACE BOOK BALANCES TO THE GENERAL LEDGER (4). 4. Trace the book balances on the division's bank reconciliations to the comparative summary. Done by Date ..../../.. SCAN PERIOD-END BANK RECONCILIATIONS (5). 5. Scan the period-end bank reconciliations for significant unusual reconciling items and adjustments made to agree the reconciliations to the comparative summary. Obtain evidence supporting these items and adjustments by inquiry or examination of supporting documentation. Done by Date ..../../.. CONFIRM CASH BALANCES (6). 6. Confirm selected period-end balances by direct correspondence with banks. Consider including all accounts open during any part of the period. The confirmation request should include inquiries as to the amount of the account balance and whether the account bears interest. Done by Date ..../../.. GUIDANCE: To be effective special inquiry letters must be addressed to appropriate individuals in the bank and clearly state the nature of the inquiry and the information required. In many cases a specific bank officer will serve the division, and it may be appropriate to direct inquiries to this individual for appropriate distribution within the bank. In any case management or the bank should be consulted on the proper routing of our request. TEST BANK RECONCILIATIONS (7). 7. Review reconciling items on the bank reconciliations as follows: a. Obtain bank statements and related supporting documents (if normally available) for the period subsequent to the balance sheet date. Note: In circumstances where there is a lack of segregation of duties over cash functions, consider whether bank statements and related supporting documents should be obtained directly from the bank. b. Trace outstanding checks listed on the bank reconciliations, but not listed on the bank statements obtained in (a) above, to the cash disbursements records for the period prior to the balance sheet date. c. Trace deposits in transit on the bank reconciliations to the subsequent bank statements and the cash receipts records for the period prior to the balance sheet date. d. Trace other reconciling items to supporting documentation and entries in the cash records. Done by Date ..../../.. GUIDANCE: The extent of review of period-end bank reconciliations and testing of underlying documentation depends on the discipline with which the division reconciles and controls cash accounts and the degree of scrutiny of the cash control procedures by individuals who are independent of day-to-day cash processing. TEST COMPLETENESS OF CASH TRANSACTIONS (8). 8. Determine how the division ensures the completeness of cash transactions (i.e., receipts and disbursements). Obtain evidence that the procedures operate as prescribed. Done by Date ..../../.. TEST MATHEMATICAL ACCURACY OF CASH RECORDS (9). 9. Test mathematical accuracy of cash receipts and disbursements records and the postings of those records to the cash control account. Done by Date ..../../.. EXAMINE BANK STATEMENTS FOR RECONCILING ITEMS (10). 10. Determine that paid checks, deposits, and debit and credit advices appearing on the bank statements obtained in step 7 above issued on or before the balance sheet date appear on the period-end reconciliations. Done by Date ..../../.. EXAMINE CASH RECORDS FOR RECONCILING ITEMS (11). 11. Examine cash receipts and disbursements records for a period before the balance sheet date to ascertain that all reconciling items are appropriately included in the division's bank reconciliations. Done by Date ..../../.. TEST TRANSFERS BETWEEN THE DIVISION'S BANK ACCOUNTS (12). 12. Determine whether any transfers of funds between the division's bank accounts have occurred near the balance sheet date. Verify that the transfers were recorded in the books in the same accounting period and that any transfers not recorded by the bank in the same accounting period appear in the appropriate bank reconciliation. Done by Date ..../../.. GUIDANCE: The auditor should always review funds transfers between bank accounts near the balance sheet date. The purposes of this test are to establish proper cutoff of cash transactions and to ascertain that misappropriations of cash are not covered up by taking advantage of the time necessary for cash transfers to clear the banks. In determining the appropriate period to review the auditor should consider the customary bank clearing period and the number of bank business days around the balance sheet date. Review Restrictions and Related Disclosures INQUIRE OF MANAGEMENT ABOUT CASH RESTRICTIONS (13). 13. Inquire of divisional management whether cash balances are restricted as to use or are the property of others. When balances include the property of others, determine that the related liability has been recorded. Determine that appropriate disclosures have been made. Done by Date ..../../.. Additional Procedures COUNT CASH ON HAND (14-15). 14. Where material, establish physical control over cash on hand as of the balance sheet date and count it in the presence of the custodian(s). Obtain the signature of the custodian(s) acknowledging that funds were counted in their presence and returned intact. 15. Reconcile balances as determined in step 14 to control accounts and trace reconciling items to supporting documentation. If the count is at a date other than period-end, reconcile activity to the balance sheet date. Determine whether there are unreimbursed expenses that should be reflected in the accounts. Done by Date ..../../.. CONSIDER CHECKS RELEASED AFTER PERIOD-END (16). 16. Determine through inquiry whether any checks drawn before period-end were released after period-end. Consider obtaining the numbers of the last checks written for the current financial period. Consider whether any reversing entries are necessary. Done by Date ..../../..