Fin.Audit 2 - 18A3 - Audit on Cash and Cash Equivalent (II)

The following are the common controls over cash except

• Segregation of duties

• Computerized control totals and edits tests

• Perform an overall estimate of depreciation expense

• Independent bank reconciliations by employees who do not handle cash

As well as for unintentional errors in recording interbank transfer, what the auditor can do to test for kiting?

• Reconcile electronic payments and cancelled checks clearing the bank with those recorded in the cash disbursements journal for a given period

• Auditors can list all interbank transfers made a few days before and after the balance sheet date and trace each to the accounting records for proper recording

• The internal auditor performs a periodic count of the actual securities and reconciles the securities counted to the investment subsidiary ledger

• The client’s board of directors authorizes all purchases and sales of investment securities

The auditor should ordinarily send confirmation requests to all banks with which the client has conducted any business during the year, regardless of the year-balance, because

• This procedure will detect kiting activities that would otherwise not be detected

• The confirmation form also seeks information about indebtedness to the bank

• The sending of confirmation requests to all such banks is required by auditing standards

• This procedure relieves the auditor of any responsibility with respect to nondetection of forged checks

A monthly bank reconciliation of the general bank account on a timely basis by someone independent of the handling or recording of cash ...... and ....... is an essential control over the ending cash balance.

........... is the excess cash invested in short-term, highly liquid investments such as time deposits, certificates of deposit, and money market funds