Discuss the objective of each of these audit procedures used to test a cash bala

Question

Discuss the objective of each of these audit procedures used to test a cash balance.Include in your discussion which PCAOB assertions for the cash account each procedure would support.Be sure to explain how each procedure would cover each of the assertions you believe it would cover for the cash balance and any limitations there might be for the assertion.That is, some procedures can provide more complete evidence to support an assertion than others can.Your answer should discuss any limits of the audit procedures as well.
Part A) Proof of Cash

Part B) Vouch the deposits in transit shown on the client's bank reconciliation to the cutoff bank statement.

Part C) Use of a bank confirmation letter.

Part D) Compare the date shown on the back of the check when the bank cancelled a heck with the date of the check for checks dated near the balance sheet date.

Explanation / Answer

The PCAOB assertions has detailed the proofs of the cash balance on the balance sheet. The procedure includes following evidences :

Part A) The evidence of the cash balance is the balance in the cash book and the physical cash available, cheque receivable pending for credit and deposits in bank.

Part B) The deposits in transit in the bank reconciliation could audited by the bank deposit slips and the bank confirmations towards the deposition of the cheques. The customers confirmation could be one of the proof for the deposits in transits.

Part C) The bank confirmation letter can be well used as proof of the deposits with the bank and the deposits for credit purpose processed through banks.

Part D) All the checks deposited and cancelled must be tallied with the cash balance and the bank reconciliation and the actual balance of accounts receivables in the balance sheet. The cancellation date on the back of the cheque should be checked with the deposits checks to know the actual cleared deposit cheques.

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