Bank & cash

Question 1

How to test completeness and existence?

Answer 1

1. Obtain standard bank confirmations
2. Trace cheques shown as outstanding from the bank reconciliation to the cashbook prior to the year end and to the after date bank statements and obtain explanations for any large or unusual items not cleared at the time of the audit
3. Compare cashbooks and bank statements in detail for the last month of the year, and match outstanding items at the reconciliation to the bank statement
4. Obtain satisfactory explanations for all items in the cashbook for which there are not corresponding entries in the bank statement and vice versa by discussing with finance staff

Question 2

How to test valuation?

Answer 2

1. Reperform the bank reconciliation
2. Compare bank reconciliation to the previous year end bank reconciliation and test whether all items are cleared in the last period or taken forward
3. Compare any contra items on the bank statement or cashbook to the original entry
4. Inspect paying in slips that uncleared bankings are paid in prior to the year end
5. Verify the bank balances to the standard bank letter and bank statements
6. Inspect the cashbook and bank statements before and after the year end for exceptional entries or transfers which may have an material effect on the year end balances

Question 3

How to test rights and obligations?

Answer 3

1. Determine whether the bank accounts are subject to any restrictions by enquiries with management

Question 4

How to test classification?

Answer 4

1. Identify whether any accounts are secured on the assets of the company by discussion with management
2. Consider whether there is a legal right of set-off of overdrafts against positive bank balances
3. Review draft accounts to ensure disclosures for bank are complete and accurate and in accordance with accounting standards