Situation f
Detailed findings
In the review of the cash section;
 Year end balances have been agreed back to copies of the monthly bank
statements;
 Copies of the statements have been put on file as audit evidence; and
 Confirmation requests have been returned to the auditor via the client.
Implications of the findings

Tests of controls of cash receipt and cash payment transaction
systems
As both the cash receipts and cash payments directly affect the account
balance of cash, tests of controls of both these systems should be
undertaken in order to check whether these systems work efficiently and
accurately then assess the level of the internal risk. These tests involve
observing the process from opening mails and preparing deposits or
cheques.

Tests of cash transactions
Substantive tests of detail of transactions should be undertakes to detect
errors in order to test occurrence and completeness. For example, the client
might have included any cash receipts made after year end in cash receipts
of the current year. Through the tests of transaction, those errors may be
detected.

Tests of cash balances
To ensure existence and completeness, test of bank reconciliations needs to
be undertaken to substantiate that balance confirmed with the bank agrees
with the client’s cash accounting records. If there are large or unusual items,
the auditor should ask the client to explain the nature of the reconciling item.
For example, an immaterial amount of item “net miscellaneous” might be a
result of two material items offsetting each other.

Inappropriate confirmation
Confirmation requests should be returned to the auditor by the bank directly
as a confirmation via the client does not test completeness. The auditor
commonly confirms the year-end cash balance by direct correspondence
with all banks with the client has had accounts during the period. AGS 1002
provides audit guidance on bank confirmation procedures.
AGS 1002 Bank Confirmation Requests
Appendix 1 Bank Confirmation – Audit Request (General)
Three (3) copies of the form should be received by the bank. All
completed copies of the Confirmation are to be signed with original
returned direct to the auditor in the enclosed stamped addressed
envelope. The duplicate is to be forwarded to the client and the triplicate
retained by the bank.
Also it is important that the auditor keep the original documents as audit
evidence.

Cash on hand
Most of entities do not have substantial cash on hand thus it is not counted.
However, in some industries such as banks or casinos have material cash
on hand therefore a cash count may be necessary.