Revenues/Receipts - Cash

Question 1

What comparison techniques can the auditor use to ensure appropriateness of transactions in the cash receipts business cycle?

Answer 1

1. )Initial cash receipts listing (remittance listing) compared to total recorded in cash receipts journal and to bank deposit
2. )Cash accounts reconciled to bank statements by independent person.

Question 2

What control mechanisms can be used to ensure the appropriate execution of transactions in the cash receipts business cycle?

Answer 2

1. )Adjusting journal entries should be approved by management.
2. )Bank reconciliations should be reviewed by management.

Question 3

List some procedures used to ensure segregation of duties in the cash receipts business cycle.

Answer 3

To ensure segregation of duties, the next activities should be handled separately (by separate individuals):

1. )Opening mail, handling checks received, and preparing remittance listing
2. )Making deposits (daily)
3. )Applying payments received to customer accounts
4. )Preparing bank reconciliations on a timely basis

Question 4

List access controls that can be used in the cash receipts business cycle.

Answer 4

1. )Employees with access to cash should be bonded.

2. )Access to cash receipts should be limited to those authorized.

Question 5

List the internal control objectives related to the Cash Receipts business cycle.

Answer 5

1. )Access to cash receipts records and accounts receivable records is limited to authorized personnel.
2. )Detailed cash and account balance records are reconciled with control accounts and bank statements monthly.
3. )All cash receipts are recorded in period received.