Chapter 9: SP - Cash and Bank

Question 1

Existence of Cash (5)

Answer 1

1. Physical verification + client’s acknowledgement
2. compare cash balance in books with physical count
3. Investigate money advanced to employees
4. Cut-off test on receipts and payments
5. High denomination currency notes = real or not

Question 2

Bank: General (2)

Answer 2

1. Obtain list of banks with accounts with closing balances and cast + agree
2. Review cashbook and bank statement for unusual entries (at y.end particularly)

Question 3

Bank reconciliation statement (5)

Answer 3

1. Cast BRS for mathematical accuracy
2. Agree balance as per cash book with Bank Statement
3. Agree balance as per** bank statement with bank confirmation letter**
4. Check each reconciliation item in the BRS with supporting documents and their clearance in the next month. (inquire mgmt if significant delay)
5. Examine supporting documentation for untraced items

Question 4

Bank confirmation letter (5)

Answer 4

1. Send confirmation letter for all bank accounts (even if account is closed at year end)
2. Agree balance as per bank reconciliation statement with bank confirmation letter
3. Confirmation should be review for other areas like bank charges and loans
4. Confirmation should be reviewed for disclosure of things in F/S like security or restriction on balance
5. Check if bank has answered all the questions asked in the letter