Auditing Procedures

I. Cash
A. Existence: Does cash exist?
1. Count cash at company
a. take control of cash and securities (to counter substitution)
b. examine checks received to determine the payee is the client
c. examine checks for endorsements
4. Request cutoff bank statement (one to two weeks after year-end).
a. Used to reconcile deposits in transit and outstanding checks.
b. Look for checks written before year end but not listed on bank reconciliation as
outstanding. May suggest "check kiting."
c. Look for the number of checks returned in cut-off statement. Fewer than
expected might mean the client is holding written checks to improve current ratio.
B Completeness. Does the balance at the end of the period reflect all cash transactions?
1. Cash cutoff test.
2. Analytical procedures
C. Rights and Obligations. Does the client own the rights to cash?
D. Valuation/allocation. Is cash valued in accord with GAAP? Foreign currency might be an
issue.
E. Presentation/Disclosure. Is cash properly classified, described and are disclosures
appropriate?
1. Inquire of management. See management representation letter.
2. Evaluate restrictions on cash
3. Assess cash flow statement.
a. evaluate presentation (direct or indirect method)
b. reconcile information with income statement and balance sheet.
4. Read financial statement notes.

CASH
1.

Discuss and document with the field treasurer the procedures for the receiving and
disbursement of cash.
a) Sources of cash (funds)
b)
c)
d)
e)
f)

2.
3.

4.

frequency of deposits
who makes the deposits
the level of cash received
The nature of documentation of expenditures (invoices, check requests, agreements)
authorization procedures

Determine whether the level of cash held in the field and in the office is appropriate.
for petty cash funds
Is an accurate petty cash voucher maintained?
Are physical cash counts
a) Conducted routinely by a person or people who are not direct custodians of the
petty cash funds?
b) Reconciled with the petty cash voucher? Can all variances be explained?
c) Documented by those people who performed the counts and reconcile these counts
against the petty cash voucher?
Is access to petty cash funds restricted? Who has access to these funds?
for all field checking accounts
a) Determine the number of signatures required on each check.
b) Determine the process by which cash is received for mission operations.
c) Obtain bank statements for each bank account.
d) Determine the frequency and timing of the preparation of bank reconciliations. Who
does the reconciliations?
e) Summarize a listing of deposits from the bank statements and reconcile the amounts
with reported home office transfers and other sources of income reflected on the fields
financial reports.
f) Obtain bank reconciliations and test for accuracy.
g) Verify whether a second party reviews bank reconciliations monthly. These
examinations should be documented with a date of examination and a signature of the
second party.