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Cash and Financial Investments

Cash and Financial Investments. Chapter 10 Juan M. Garcia Merced Cont 4017. Sources and Nature of Cash. Includes general, payroll, petty cash and savings accounts. Cash equivalents are often combined with cash items (Cd’s, money market funds).

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Cash and Financial Investments

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  1. Cash and Financial Investments Chapter 10 Juan M. Garcia Merced Cont 4017

  2. Sources and Nature of Cash • Includes general, payroll, petty cash and savings accounts. • Cash equivalents are often combined with cash items (Cd’s, money market funds). • The liquid nature of cash increases the risk of misappropriation. CPA Juan M. Garcia Merced

  3. Auditor’s Objectives - Cash • Substantiate theexistence of recorded cash and occurrence of the related transactions • Establish the completenessof recorded cash • Verify the cutoff and accuracy of cash transactions • Determine that the client has rightsto recorded cash • Determine that the presentation and disclosure of cash, includingrestricted funds, are appropriate CPA Juan M. Garcia Merced

  4. Audit Time for Cash • Auditors devote a larger proportion of the total audit hours to cash than might be suggested by the relatively small amount at year end. • All transactions flow through cash. • Most liquid asset. • Inherent risk is high. CPA Juan M. Garcia Merced

  5. Audit Program – Substantive Procedures for Cash CPA Juan M. Garcia Merced

  6. Obtain analyses of cash balances and trace or reconcile them to the general ledger CPA Juan M. Garcia Merced

  7. Send Standard Bank Conf. CPA Juan M. Garcia Merced

  8. Obtain or prepare bank reconciliations CPA Juan M. Garcia Merced

  9. Obtain a cutoff bank statement containing transact. of at least 7 days subsequent to the balance sheet date CPA Juan M. Garcia Merced

  10. Count and list cash on hand CPA Juan M. Garcia Merced

  11. Verify the clients’ cutoff of cash receipts and disbursements CPA Juan M. Garcia Merced

  12. Analyze bank transfers for last week of audit year and first week of following year CPA Juan M. Garcia Merced

  13. Investigate any checks representing large or unusual payments to related parties To directors, employees, affiliated companies, or cash should be carefully reviewed to determine whether the transaction were: Properly authorized and recorded. Adequately disclosed in the financial statements. CPA Juan M. Garcia Merced

  14. Evaluate proper financial statement presentation and disclosure of cash CPA Juan M. Garcia Merced

  15. Questions? CPA Juan M. Garcia Merced

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