Risk of Cash Mistatements

Question 1

A shortage of cash may have been “hidden” by leaving outstanding checks off the year-end bank reconciliation.

Answer 1

Examine the bank cutoff statement to determine whether any checks dated at or before year-end were omitted from the bank reconciliation’s list of outstanding checks.

Question 2

The bookkeeper may have embezzled payments received on accounts receivable and written off the accounts as uncollectible.

Answer 2

Confirm accounts receivable that have been written off as uncollectible

Question 3

There is a chance that collections of accounts receivable were received in January, but recorded as of December 31.

Answer 3

Examine the bank cutoff statement to determine whether deposits recorded as of year-end have cleared within a reasonable period.

Question 4

Total cash may be overstated due to its total exceeding the sum of cash in all of the cash accounts.

Answer 4

Calculate totals on the cash lead schedule

Question 5

Certain of the cash may be restricted in that it may not be used until an outstanding debt agreement has been repaid.

Answer 5

Examine debt agreements.