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1、23-12006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderAudit of Cash BalancesChapter 2323-22006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Bea
2、sley/Elder Arens/Beasley/ElderLearning Objective 1Show the relationship of cashin the bank to the varioustransaction cycles.23-32006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderRelationships of Cash in th
3、e Bank and Transaction CyclesCash in BankCash in BankCapital Stock CommonCapital Stock CommonPaid-in Capital in ExcessPaid-in Capital in Excessof Par Commonof Par CommonRedemptionRedemptionof stockof stockRedemptionRedemptionof stockof stockIssue ofIssue ofstockstockIssue ofIssue ofstockstockDividen
4、ds PayableDividends PayablePayment ofPayment ofdividendsdividendsCapital Acquisition And Repayment CycleCapital Acquisition And Repayment Cycle23-42006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderRelation
5、ships of Cash in the Bank and Transaction CyclesAcquisition and Payment CycleAcquisition and Payment CycleCash in BankCash in BankAccounts PayableAccounts PayablePaymentPayment23-52006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/
6、Elder Arens/Beasley/ElderRelationships of Cash in the Bank and Transaction CyclesSales and Collection CycleSales and Collection CycleCash in BankCash in BankAccounts ReceivableAccounts ReceivableGross SalesGross SalesCashCashsalessalesCashCashreceiptsreceiptsCash Discounts TakenCash Discounts Taken2
7、3-62006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderRelationships of Cash in the Bank and Transaction CyclesPayroll and Personnel CyclePayroll and Personnel CycleCash in BankCash in BankAccrued Wages,Sala
8、ries,Accrued Wages,Salaries,Bonuses,and CommissionsBonuses,and CommissionsWithheld Income TaxesWithheld Income Taxesand Other Deductionsand Other DeductionsPaymentPaymentPaymentPaymentAccrued PayrollAccrued PayrollTax ExpenseTax ExpensePaymentPayment23-72006 Prentice Hall Business Publishing,2006 Pr
9、entice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderCash in the Bank and Transaction Cycles Failure to bill a customer Failure to bill a customer Billing a customer at a lower price than Billing a customer at a lower price than called for by company pol
10、icy called for by company policy A defalcation of cash by interception of A defalcation of cash by interception of cash receipts from customers before cash receipts from customers before they are recorded,with the account they are recorded,with the account charged off as a bad debt charged off as a
11、bad debtMisstatements which may not be discoveredMisstatements which may not be discoveredas a part of the audit of the bank reconciliation:as a part of the audit of the bank reconciliation:23-82006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,
12、Arens/Beasley/Elder Arens/Beasley/ElderCash in the Bank and Transaction Cycles Duplicate payment of a vendors invoice Duplicate payment of a vendors invoice Improper payments of officers personal Improper payments of officers personal expenditures expenditures Payment for raw materials that were not
13、 Payment for raw materials that were not received received Payment to an employee for more hours Payment to an employee for more hours worked worked Payment of interest to a related party for Payment of interest to a related party for an amount in excess of the going rate an amount in excess of the
14、going rate23-92006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderCash in the Bank and Transaction CyclesMisstatements which are normally discoveredMisstatements which are normally discoveredas a part of the
15、 tests of a bank reconciliation.as a part of the tests of a bank reconciliation.Failure to include a check that has not Failure to include a check that has not cleared the bank,even though it has been cleared the bank,even though it has been recorded in the cash disbursements journal recorded in the
16、 cash disbursements journal Cash received by the client subsequent to Cash received by the client subsequent to the balance sheet date but recorded as the balance sheet date but recorded as cash receipts cash receipts in the current yearin the current year23-102006 Prentice Hall Business Publishing,
17、2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderCash in the Bank and Transaction Cycles Deposits recorded as cash receipts near Deposits recorded as cash receipts near the end of the end of the year,deposited in the bankthe year,deposited in
18、the bank in the same month,and included in the bank in the same month,and included in the bank reconciliation as a reconciliation as a deposit in transitdeposit in transit Payments on notes payable debited directly Payments on notes payable debited directly to the to the bank balance by the bank but
19、 notbank balance by the bank but not entered in the clients records entered in the clients records23-112006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderCash in the Bank and Transaction Cycles Deposits rec
20、eived by the bank on behalf Deposits received by the bank on behalf of the of the company from credit card agenciescompany from credit card agencies and other vendors making payments and other vendors making payments electronically,but not recorded in electronically,but not recorded in the clients r
21、ecords.the clients records.23-122006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderLearning Objective 2Identify the major types of cashaccounts maintained bybusiness entities.23-132006 Prentice Hall Busines
22、s Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/Elder General cash account General cash account Imprest payroll account Imprest payroll account Branch bank account Branch bank account Imprest petty cash fund Imprest petty cash fund Ca
23、sh equivalents Cash equivalentsTypes of Cash Accounts23-142006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderRelationship of General Cash to Other Cash AccountsBranch BankBranch BankAccountAccountCashCashEq
24、uivalentsEquivalentsImprest PayrollImprest PayrollAccountAccountImprest PettyImprest PettyCash FundCash FundGeneralGeneralCashCash23-152006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderLearning Objective 3
25、Design and perform audit testsof the general cash account.23-162006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderIdentify client business risks affecting cash inIdentify client business risks affecting cas
26、h inbank.bank.Methodology for Designing Testsof Details of Balances for A/RPhase IPhase ISet tolerable misstatement and assess inherentSet tolerable misstatement and assess inherentrisk for cash in bank.risk for cash in bank.Assess control risk for cash in bank.Assess control risk for cash in bank.2
27、3-172006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderMethodology for Designing Testsof Details of Balances for A/RDesign and perform tests of controls andDesign and perform tests of controls andsubstantiv
28、e tests of transactions forsubstantive tests of transactions forseveral cycles.several cycles.Phase IIPhase II23-182006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderMethodology for Designing Testsof Detail
29、s of Balances for A/RDesign and perform analytical procedures forDesign and perform analytical procedures forcash in bank balance.cash in bank balance.Phase IIITimingTimingItems toItems toselectselectSampleSamplesizesizeAuditAuditproceduresproceduresDesign tests of details of cash in bank balanceDes
30、ign tests of details of cash in bank balanceto satisfy balance-related audit objectives.to satisfy balance-related audit objectives.23-192006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderAudit Schedule for
31、 a Bank ReconciliationClawson IndustriesClawson IndustriesBank ReconciliationBank Reconciliation12/31/0512/31/05ScheduleSchedule A2A2 DateDatePrepared byPrepared by ClientClient DEDDED 1/10/051/10/05Approved byApproved by SWSW1/18/051/18/05Account 101 General account,First National BankAccount 101 G
32、eneral account,First National BankBalance per bankBalance per bank$109,713$109,713Add:Add:Deposits in transitDeposits in transit 21,117 21,117Deduct:Outstanding checksDeduct:Outstanding checks 87,462 87,462Other reconciling items:Bank errorOther reconciling items:Bank error 15,200 15,200Balance per
33、bank,adjustedBalance per bank,adjusted$28,168$28,168Balance per books before adjustmentsBalance per books before adjustments$32,584$32,584Adjustments:Adjustments:Unrecorded bank service chargeUnrecorded bank service charge 216 216NSFNSF4,2004,200 4,416 4,416Balance per books,adjustedBalance per book
34、s,adjusted$28,168$28,16823-202006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderBalance-Related Objectives:General Cash in the BankDetail tie-inDetail tie-inCutoffCutoffPresentationPresentationand disclosur
35、eand disclosureExistenceExistenceCompletenessCompletenessAccuracyAccuracy23-212006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderReceipt of a bankReceipt of a bankconfirmationconfirmationReceipt of a cutoff
36、Receipt of a cutoffbank statementbank statementTests of the bankTests of the bankreconciliationreconciliationExistence,Accuracy,and Completeness23-222006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderTypes
37、of Audit Tests Used for General Cash in BankCash in BankCash in BankEnding balanceEnding balanceTOC-TTOC-T+TOC-BTOC-B+STOTSTOT+APAP+TDB+TDB=Sufficient competent evidence per GAAS=Sufficient competent evidence per GAASAudited byAudited byTOC-TTOC-T,STOTSTOT,and,and APAPBeginning balanceBeginning bala
38、nceCash receiptsCash receiptsCash disbursementsCash disbursementsAudited byAudited byTOC-TTOC-T,STOTSTOT,and,and APAPAudited byAudited byTOC-BTOC-B,APAP,and,and TDBTDB23-232006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Ar
39、ens/Beasley/ElderLearning Objective 4Recognize when to extend audittests of the general cash accountto test further for material fraud.23-242006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderExtended Tests
40、of the Bank ReconciliationWhen the auditor believes that the year-end bankWhen the auditor believes that the year-end bankreconciliation may be intentionally misstated,reconciliation may be intentionally misstated,it is appropriate to perform extended testsit is appropriate to perform extended tests
41、of the year-end bank reconciliation.of the year-end bank reconciliation.In addition to these tests,the auditor must alsoIn addition to these tests,the auditor must alsocarry out procedures subsequent to the end ofcarry out procedures subsequent to the end ofthe year with the use of the bank cutoff s
42、tatement.the year with the use of the bank cutoff statement.23-252006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/Elder All recorded cash receipts were deposited.All recorded cash receipts were deposited.All d
43、eposits in the bank were recorded inAll deposits in the bank were recorded inthe accounting records.the accounting records.All recorded cash disbursements wereAll recorded cash disbursements werepaid by the bank.paid by the bank.All amounts that were paid by the bankAll amounts that were paid by the
44、 bankwere recorded.were recorded.Proof of Cash23-262006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/Elder the balance on the bank statement with the balance on the bank statement with the general ledger balanc
45、e at the the general ledger balance at the beginning of the proof-of-cash period beginning of the proof-of-cash period cash receipts deposited per the bank with cash receipts deposited per the bank with the cash receipts journal for a given period the cash receipts journal for a given periodProof of
46、 Cash23-272006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/Elder cancelled checks clearing the bank with cancelled checks clearing the bank with the cash disbursement journal for a the cash disbursement journa
47、l for a given period given period the balance on the bank statement with the balance on the bank statement with the general ledger balance at the end the general ledger balance at the end of the proof-of-cash period of the proof-of-cash periodProof of Cash23-282006 Prentice Hall Business Publishing,
48、2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderThe accuracy of the information on theThe accuracy of the information on theinterbank transfer schedule should be verified.interbank transfer schedule should be verified.The interbank transfers
49、must be recorded inThe interbank transfers must be recorded inboth the receiving and disbursing banks.both the receiving and disbursing banks.The date of the recording of the disbursementsThe date of the recording of the disbursementsand receipts for each transfer must be inand receipts for each tra
50、nsfer must be inthe same fiscal year.the same fiscal year.Tests of Interbank Transfers23-292006 Prentice Hall Business Publishing,2006 Prentice Hall Business Publishing,Auditing 11/e,Auditing 11/e,Arens/Beasley/Elder Arens/Beasley/ElderDisbursements on the interbank transferDisbursements on the inte