SolutionARENSAuditing13eAEBSMCH231Word格式.docx

1、s controls over cash receipts assist the auditor in determining that cash received is promptly deposited, that receipts recorded are proper, that customer accounts are promptly updated, and that the cash cutoff at year-end is proper. If the results of the evaluation of internal control, the tests of

2、 controls, and the substantive tests of transactions are adequate, it is appropriate to reduce the tests of details of balances for cash, especially for the detailed tests of bank reconciliations. On the other hand, if the tests indicate that the clients controls are deficient, extensive year-end te

3、sting may be necessary.23-2 The appropriate tests for the ending balance in the cash accounts depend heavily on the initial assessment of control risk, tests of controls, and substantive tests of transactions for cash disbursements. The companys controls over cash disbursements assist the auditor in

4、 determining that cash disbursed is for approved company purposes, that cash disbursements are promptly recorded in the proper amount, and that cash cutoff at year-end is proper. If the results of the evaluation of internal control, the tests of controls, and the substantive tests of transactions ar

5、e adequate, it is appropriate to reduce the tests of details of balances for cash, especially for the detailed tests of bank reconciliations. On the other hand, if the tests indicate that the clients controls are inadequate, extensive year-end testing may be necessary. An example in which the conclu

6、sions reached about the controls in cash disbursements would affect the tests of cash balances would be:If controls over the issuance of blank checks, the review of payees, amounts, and supporting documentation, the signing of checks, and the reconciliation of bank statements and vendors statements

7、are adequate, the auditors review of outstanding checks on the year-end bank reconciliation may be greatly reduced. The year-end outstanding checks can be verified by testing a sample of checks returned with the cutoff bank statement rather than tracing all paid outstanding checks and the final mont

8、hly checks in the cash disbursements journal to the last months cleared checks and the bank reconciliation.23-3 The monthly reconciliation of bank accounts by an independent person is an important internal control over cash balances because it provides an opportunity for an internal verification of

9、the cash receipts and cash disbursements transactions, investigation of reconciling items on the bank reconciliation, and the verification of the ending cash balance. Anyone responsible for the following duties would not be considered independent for the purposes of preparing monthly bank reconcilia

10、tions: Issuance of checks Receipt and deposit of cash Other handling of cash Record keeping 23-4 The controllers approach is to reconcile until the balance agrees. The shortcoming of this approach is that it does not include a review of the items that flow through the account and it opens the door f

11、or the processing of improper items. Such items as checks payable to improper parties, reissuance of outstanding checks to improper parties, and kiting of funds would not be discovered with the controllers approach. The controllers procedures should include the following: a. Examination of all check

12、s clearing with the statement （including those on previous months outstanding check list） and comparison of payee and amount to the cash disbursements journal. b. Test of cash receipts to determine that they are deposited within a reasonable amount of time. c. Follow-up on old outstanding checks so

13、that they can be recognized as income after it is determined that they will not be cashed, and no liability exists.23-5 Bank confirmations differ from positive confirmations of accounts receivable in that bank confirmations request several specific items of information, namely: 1. The balances in al

14、l bank accounts. 2. Restrictions on withdrawals. 3. The interest rate on interest-bearing accounts. 4. Information on liabilities to the bank for notes, mortgages, or other debt. Positive confirmations of accounts receivable request of the buyer to confirm an account balance stated on the confirmati

15、on form or designate a different amount with an explanation. The auditor anticipates few exceptions to accounts receivable confirmations, whereas with bank confirmations he expects differences that the client must reconcile. Bank confirmations should be requested for all bank accounts, but positive

16、confirmations of accounts receivable are normally requested only for a sample of accounts. If bank confirmations are not returned, they must be pursued until the auditor is satisfied as to what the requested information is. If positive confirmations of accounts receivable are not returned, second an

17、d maybe third requests may be made, but thereafter, follow-ups are not likely to be pursued. Alternative procedures, such as examination of subsequent payments or other support of customers accounts may then be used.23-5 （continued） The reason why more importance is placed on bank confirmations than

18、 accounts receivable confirmations is that cash, being the most liquid of assets, must be more closely controlled than accounts receivable. In addition, other informationsuch as liabilities to the bank must be known for purposes of the financial statements. Finally, there are usually only a few bank

19、 accounts and most bank accounts have a large volume of transactions during the year.23-6 This is a good auditing procedure that attempts to discover if any accounts that should have been closed are still being used, such as by a company employee to deposit customer remittances. The procedure may al

20、so discover unrecorded and contingent liabilities.23-7 A cutoff bank statement is a partial period bank statement with the related cancelled checks, duplicate deposit slips, and other documents included in bank statements, which is mailed by the bank directly to the auditor. The purpose of the cutof

21、f bank statement is to verify the reconciling items on the clients year-end reconciliation with evidence that is inaccessible to the client.23-8 Auditors are usually less concerned about the clients cash receipts cutoff than the cutoff for sales, because the cutoff of cash receipts affects only cash

22、 and accounts receivable and not the income statement, whereas a misstatement in the cutoff of sales affects accounts receivable and the income statement. For the purpose of detecting a cash receipt cutoff misstatement, there are two useful audit procedures. The first is to trace the deposits in tra

23、nsit to the cutoff bank statement to determine the date they were deposited in the bank account. Because the recorded cash will have to be included as deposits in transit on the bank reconciliation, the auditor can test for the number of days it took for the in-transit items to be deposited. If ther

24、e is more than a two or three day delay between the balance sheet date and the subsequent deposit of all deposits in transit, there is an indication of a cutoff misstatement. The second audit procedure requires being on the premises at the balance sheet date and counting all cash and checks on hand

25、and recording the amount in the audit files. When the bank reconciliation is tested, the auditor can then check whether the deposits in transit equal the amount recorded.23-9 An imprest bank account for a branch operation is one in which a fixed balance is maintained. After authorized branch personn

26、el use the funds for proper disbursements, they make an accounting to the home office. After the expenditures have been approved by the home office, a reimbursement is made to the branch account from the home offices general account for the total of the cash disbursements. The purpose of using this

27、type of account is to provide controls over cash receipts and cash disbursements by preventing the branch operators from disbursing their cash receipts directly, and by providing review and approval of cash disbursements before more cash is made available.23-10 The purpose of the four-column proof o

28、f cash is to verify: Whether all recorded cash receipts were deposited. Whether all deposits in the bank were recorded in the accounting records. Whether all recorded cash disbursements were paid by the bank. Whether all amounts that were paid by the bank were recorded as cash disbursements in the a

29、ccounting records. Two types of misstatements that the four-column proof of cash is meant to uncover are: Cash received that was not recorded in the cash receipts journal Checks that cleared the bank but have not been recorded in the cash disbursements journal23-11 Whenever a cutoff bank statement i

30、s not received directly from the bank, the auditor may verify the bank statement for the month subsequent to year-end. The audit procedures used for the verification are as follows: 1. Foot all of the cancelled checks, debit memos, deposits, and credit memos. 2. Check to see that the bank statement

31、balances when the totals in 1 are used. 3. Review the items included in 1 to make sure they were cancelled by the bank in the proper period and do not include any erasures or alterations.The purpose of this verification is to test whether the clients employees have omitted, added, or altered any of the documents accompanying the statement.23-12 Lapping is a defalcation in which a cash shortage is concealed by delaying the crediting of cash receipts to the proper accounts receivable. The first step in the fraud is to withhold cash remitted by a customer from a bank deposit.