1. Cash receipts should be deposited intact — that is, in the same amount and form as they are received.
2. All disbursements should be authorized and made by check except those involving small amounts which should be paid from petty cash fund.
3. Both receipts and disbursements should be properly accounted for in the records.
4. There should be separation of personnel duties for
a. receiving cash
b. recording receipts
c. depositing cash collections
d. reconciling bank account
e. authorizing disbursement
f. disbursing cash
5. Bank reconciliation statement should be prepared monthly.
6. Provide physical protection for cash.
7. Minimize cash on hand in the office.
8. Cash actually present in the office — petty cash, change fund and undepos ted receipts can be periodically counted and compared with the company records.
9. Adopt imprest fund system for petty cash.
Substantive Audit Procedures for Cash
Existence: Cash recorded on the books exist
1. Count cash on hand.
2. Confirm bank balances.
Examine interbank transfers.
4. Perform analytical procedures.
Completeness: All of the entity's cash is included
5. Perform cash cutoff test.
6. Prepare proof of cash.
Rights and obligations: Any restrictions on cash have been identified
7. Examine standard bank confirmations and read the minutes of the board of directors' meetings to determine whether any restrictions have been placed on cash.
Valuation and allocation: Cash is correctly valued
8. Obtain bank cutoff statements directly from the bank and use them to test the bank reconciliation as of the balance sheet date.
Presentation and disclosure: Cash is presented and disclosed properly
9. Review financial statements and perform analytical procedures to determine whether accounts are classified and disclosed in accordance with GAAP.
Completeness: All receipts of cash and checks are recorded
1. For a sample of days, verify that all cash receipts are recorded by reconciling daily listing(s) of cash receipts and validated deposit ticket to cash receipts journal.
Occurrence: Recorded receipts represent actual collections of cash from customers
2. For a sample of entries in cash receipts journal, trace to the prelisting of cash receipts and to remittance advice. For a sample of entries, reconcile daily deposit to validated deposit ticket.
Classification: Cash receipts transactions have been recorded in the proper accounts
3. Review account coding for a sample of entries in the cash receipts journal.
Accuracy (Valuation): Debits to cash and credits to accounts receivable are valued at amounts received
4. For a sample of entries in cash receipts journal, examine remittance advice and verify that discount taken was appropriate. Foot accounts receivable subsidiary ledger and reconcile to general ledger.
Completeness: All cash payments made are recorded
1. Reconcile cash payments per books with cash payments per bank. Prepare or test bank reconciliation.
Occurrence: Recorded cash payments occurred
2. Examine paid checks for appropriate endorsements. Examine documents underlying payments.
Classification: Cash payments transactions have been recorded in the proper accounts
3. Check accuracy of accounts on invoices by reference to chart of accounts.
Accuracy (Valuation): Debits to various accounts and credits to cash are valued at proper amounts
4. Recalculate invoices paid.