1.
Bank Audit Procedures
A. Obtain and Review Bank Records
Collect all bank account details, including bank statements, and
reconciliation statements.
Verify the bank account type, balance, and transaction history.
B. Test Bank Reconciliations
Obtain the latest bank reconciliation statement prepared by the
client.
Verify the mathematical accuracy of the reconciliation.
Match the closing balance in the reconciliation with the balance in
the bank statement and the general ledger.
Investigate unreconciled items such as:
o Outstanding checks: Verify if they have cleared in the
subsequent period.
o Deposits in transit: Check their recording and clearance in
subsequent bank statements.
2. Cash Audit Procedures
B. Review Petty Cash
Review petty cash records for proper documentation and
authorization.
Verify expense claims and replenishment records.
C. Evaluate Internal Controls
Assess controls over cash receipts, disbursements, and petty cash
management.
Check for segregation of duties in cash handling processes.
D. Analyze Cash Book
Check for irregularities such as unexplained cash receipts or
payments.
Trace large or unusual transactions to supporting documents.
F. Test Cut-Off Procedures
Verify that all cash transactions have been recorded in the correct
accounting period.
1. Existence
Definition: Cash and cash equivalents recorded in the financial
statements exist as of the reporting date.
Audit Procedure:
o Perform a physical cash count.
o Obtain direct confirmation from banks for account balances.
o Verify bank statements and deposit slips.
2. Completeness
Definition: All cash and cash equivalent balances that should have
been recorded are included in the financial statements.
Audit Procedure:
o Trace transactions from cash receipts and disbursement
journals to the general ledger.
o Verify that all bank accounts (active and dormant) are
included.
o Review subsequent period transactions to identify any
unrecorded balances or deposits in transit.
3. Rights and Obligations
Definition: The entity has legal ownership and rights to the cash
and cash equivalents reported.
Audit Procedure:
o Inspect bank confirmations to confirm ownership of accounts.
o Review bank account agreements or legal documents for
restrictions (e.g., pledged accounts).
o Ensure accounts are not misclassified as the property of the
entity.
4. Accuracy, Valuation, and Allocation
Definition: Cash and cash equivalents are recorded at the correct
amounts and properly valued in the financial statements.
Audit Procedure:
o Verify bank reconciliations for accuracy.
o Test for accurate recording of bank charges, interest income,
and other adjustments.
5. Cut-off
Definition: Cash transactions are recorded in the correct
accounting period.
Audit Procedure:
o Review transactions around the year-end to ensure proper cut-
off for receipts and disbursements.
o Check deposits in transit and outstanding checks for proper
classification.
6. Presentation and Disclosure
Definition: Cash and cash equivalents are properly classified,
described, and disclosed in the financial statements.
Audit Procedure:
o Review financial statements to ensure cash equivalents (e.g.,
short-term investments) meet the definition under accounting
standards.
o Confirm adequate disclosure of restricted funds, overdrafts, or
pledged accounts.
o Verify compliance with relevant financial reporting standards
(e.g., IFRS or GAAP).
