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CONTRIBUTED ON June 5, 2002 BY: JOY CELESTE ([email protected])

Customized Audit Work Program –

Audit Work Program – Cash and Cash Equivalents

Subsidiary/Department:

Date:

AUDIT OBJECTIVES:

To determine whether:

1. The cash balances represent all cash and cash items on hand, in transit to or in financial institutions and are

properly recorded.

2. The cash balances are properly described and classified and adequate disclosures are made of restricted or

committed funds and of cash not subject to immediate withdrawal (e.g., time deposits and deposits in foreign

countries subject to exchange controls, etc.).

AUDIT PROCEDURES:

ProceduresWP

Ref.

Done

Y/N?By Date Comments

1) ANALYTICAL PROCEDURES—GENERAL

a) Compare the balance of each significant cash and cashequivalent account with the comparable balance for the

preceding period. Investigate significant or unusualfluctuations.

b) Compare the ratio of available cash to cash invested withthe comparable ratio for the preceding period.Investigate significant or unusual fluctuations.

c) Relate changes in working capital and in debt balancesto changes in cash balances and compare cash balancesto seasonal fluctuations in the entity's business.

2) REVIEW OF CASH MANAGEMENT SYSTEM

a) Obtain an understanding of the client's cash management

system and the business purposes of the practices

involved. Document this information in a memorandum

i) Obtain assurances from the appropriate level of

management that the cash management activitieshave legitimate business purposes and are proper.

b) Throughout the performance of interim tests of cash and

cash equivalents, be alert to potential indicators of

"excessive overdrafting," "chaining" and other types of

cash abuses. If potential indicators of abuses in the cash

management system are noted, consider the followingadditional procedures:

i) Request the client to obtain a written legal opinion

of competent counsel as to the propriety of the

practices in use.

ii) Confirm directly with the client's banks their

knowledge of, and concurrence with, the company's

cash management practices.

3) CONFIRMATION OF CASH BALANCES WITH THIRD

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PARTIES

a) Confirm bank balances of selected cash accounts as of

the reconciliation test date, Confirm the following

accounts:

• All general disbursing accounts

• Accounts with large balances. Scope:( )

• A sample of other accounts. Scope:( )

•

Time deposits and certificates of deposit.Scope:( )

• Significant accounts closed since the previous audit.(Specifically inquire whether there have been any

transactions since closing and whether the bank has

been notified of the closing of the account.)

i) Request cutoff bank statements for the general

disbursing accounts and selected accounts

confirmed for( ) days after the reconciliation date

(increase the cutoff period for any accounts theclient reconciles by the "batch" method for

outstanding checks). Scope:( )

ii) Prepare a confirmation control of the accounts

circularized and cutoff bank statements requested.

b) If cutoff bank statements are not received directly from

the banks, consider the need to determine the

authenticity of the statements received by the client. If it

is considered necessary, perform the following:

i) Review the cancellation dates on checks, debit and

credit memos, etc., to determine whether they apply

to the period covered by the cutoff statement and

whether there have been any substitutions.

ii) Foot (a) canceled checks and debit memos and (b)deposits and credit memos to determine whether allsupporting items are included with the statement.

Balance the statement, using the totals so

determined.

iii) Review the bank statement for possible alterations

or erasures.

c) Return cutoff bank statements, together with canceledchecks and other enclosures, to the client employee who

normally receives such statements from the bank. Obtaina signed receipt, written in ink, for inclusion in the

working papers.

d) Cross-reference other information confirmed in

conjunction with the cash accounts (e.g., liabilities and

contingencies) to the applicable sections of the working

papers.

4) TESTS OF BANK RECONCILIATIONS

a) Have the client prepare a summary of the bank

reconciliations for all cash accounts with significant

balances and all cash accounts with a high volume of

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transactions. Verify the clerical accuracy of the

summary and perform the following: Reconciliationdate: ( ) Scope: ( )

i) Trace the "bank balance" for each account included

in the summary to the related confirmation and to

the cutoff or subsequent bank statement. Investigate

any differences.

ii) Trace the "book balance" for each account includedin the summary to the general ledger or a subsidiary

bank ledger.

(1) If the individual account balances are reflected

in a subsidiary bank ledger, have the client

reconcile the subsidiary ledger to the control

accounts. Investigate significant or unusual

reconciling items.

iii) Compare the totals of significant reconciling items(e.g., deposits in transit and outstanding checks)

with comparable totals for the preceding period.

Investigate significant or unusual fluctuations.

iv) Have the client prepare a list of deposits in transit

for each account included in the summary that has

total deposits in transit in excess of ( ). Foot each

list and compare the total with the reconciliationsummary.

(1) Verify significant deposits in transit by tracing

the amounts to the cutoff or subsequent bank

statement. Investigate any unusual delays in the

credit of such amounts by the bank and explain

in the working papers. Scope: ( )

(2) Obtain directly from the bank authenticated

duplicate deposit slips covering in-transitdeposits, requesting that the bank compare the

detail on the copy of the deposit slip submitted

with the detail on the bank's copy. Trace the

detail thereon to the cash receipts journal or

register, item for item. Scope: ( )

(3) If the bank cannot or will not compare the

detail on the copy of the deposit slip submittedwith the detail on the bank's copy, consider

requesting access to the bank's files or

requesting photocopies of the bank's copies of the deposit slip, so the audit team can make the

comparison.

v) Have the client prepare a list of outstanding checks

for each account included in the summary that hastotal outstanding checks in excess of ( ). Foot each

list and compare the total with the reconciliation

summary.

(1) Scan each list for unusual amounts (e.g., round

amounts, repetitive amounts, unreasonably

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large amounts, etc.). List any such items for

further investigation.

(2) Scan through the canceled checks returned with

the cutoff or subsequent bank statement for

unusual payees (e.g., checks made out to

employees, related parties, cash, etc.). List any

such items for further investigation.

(3) Trace selected canceled checks returned withthe cutoff or subsequent bank statement and

dated before the reconciliation date to the list of outstanding checks. Compare the number, date,

payee and amount of each check with the check

register or similar record. Scope: ( )

(4) Compare the number, date, payee and amount

of selected outstanding checks not clearing with

the cutoff or subsequent bank statement and

dated before the reconciliation date with thecheck register or similar record. Scope: ( )

(5) Review selected canceled checks returned withthe cutoff or subsequent bank statement and

dated after the reconciliation date. Determine

that the dates of the first bank endorsements did

not precede the reconciliation date. Scope: ( )

(6) Account for all checks issued during the month

ending in the reconciliation date in excess of

( ) as having been voided, having cleared the

bank (by comparing paid checks with check

register entries) or being outstanding.

vi) Investigate other reconciling items (e.g., bank

errors, deposit corrections, bank charges, returnedchecks, etc.) for each account included in the

summary.

(1) Verify significant items by reference to the

cutoff or subsequent bank statements and

supporting critical forms and documents ( ).

Scope: ( )

(2) Obtain an explanation for other reconciling

items that have not cleared the bank in thesubsequent period.

(3) If the reconciliation is performed as of the balance sheet date, propose adjustments for

reconciling items that cleared the bank before

the reconciliation date but are recorded on the

books at a subsequent date.

5) TESTS OF INTERBANK AND INTRABANK

TRANSFERS

a) Have the client prepare a list of interbank and intrabank

transfers for ( ) days before and after the reconciliation

date. Scope:( )

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i) Determine whether any interbank or intrabank transfers noted in testing bank reconciliations and

reviewing the cash records have been included in

the listing.

ii) Compare listed amounts with the appropriate bank

reconciliations and determine whether transfers as

of the reconciliation date were properly accounted

for as outstanding checks and deposits in transit.Scope:( )

6) COUNTS OF CASH ON HAND (TO BE COORDINATED WITHTHE COUNT OF MARKETABLE OR OTHER NEGOTIABLESECURITIES.)

a) Count material amounts of undeposited cash receipts and

cash working funds held by individuals or departments

that participate in the processing of the receipts (and

other material cash funds) as of the balance sheet date.

Record the details of the items counted and include such

documentation in the working papers. Scope:( )

i) Ensure that the custodian or other authorized

management representative is present at all times

during the count and obtain signed receipts, written

in ink, from client personnel for the return of all

cash handled by representatives of the Firm. Retain

the receipts in the working papers.

ii) Control undeposited cash receipts to the depository.

Determine whether the deposit appears as an in-

transit item on the bank reconciliation of the proper

account and that it was accepted by the depository

without material subsequent adjustment.

b) Confirm material cash funds held by employees or other custodians as of the balance sheet date. Scope:( )

7) ANSWER INTERNAL CONTROL QUESTIONNAIRES (ICQ A-1,

A-2 and A-3)

8) SUPERVISION, REVIEW AND CONCLUSIONS

a) Conclude responsive to the audit objectives.

b) Prepare points regarding internal controls and other business matters.

c) Perform senior review and supervision.

d) Clear senior review points.

e) Clear manager review points.

PERFORMED BY: REVIEWED BY:

Audit Assistant Audit Supervisor

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