Chapter 10 - Cash and financial investments. This chapter described the fundamental controls over cash receipts and disbursements and financial investments. It also explained how the auditors design tests of controls for cash and financial investments and substantive tests for these accounts. | Cash and Financial Investments Chapter 10 1 Internal Control Over --Cash Receipts Cash sales Involvement of two or more employees Cash Registers Electronic point of sales systems Collections of receivables Initial listing of cash receipts Custody and depositing of cash receipts Maintenance of customer account records Reconciliation of customers’ ledgers with control accounts Mailing monthly statements to customers Collection activity and past-due accounts 10- 2 2 2 3 Internal Control--Cash Disbursements Segregation of duties Payment by check or electronic funds transfer Match of purchase order and receiving documents with vendor’s invoice Review of supporting documents by authorized check signer Cancel of supporting documents Authorized check signer should mail checks 10- 4 4 10- Objectives for the Audit Cash Consider the inherent risks related to cash, including fraud risks Consider internal control over cash transactions Substantiate the existence of recorded cash . | Cash and Financial Investments Chapter 10 1 Internal Control Over --Cash Receipts Cash sales Involvement of two or more employees Cash Registers Electronic point of sales systems Collections of receivables Initial listing of cash receipts Custody and depositing of cash receipts Maintenance of customer account records Reconciliation of customers’ ledgers with control accounts Mailing monthly statements to customers Collection activity and past-due accounts 10- 2 2 2 3 Internal Control--Cash Disbursements Segregation of duties Payment by check or electronic funds transfer Match of purchase order and receiving documents with vendor’s invoice Review of supporting documents by authorized check signer Cancel of supporting documents Authorized check signer should mail checks 10- 4 4 10- Objectives for the Audit Cash Consider the inherent risks related to cash, including fraud risks Consider internal control over cash transactions Substantiate the existence of recorded cash Establish the completeness of recorded cash Determine that the client has rights to recorded cash Determine that the presentation and disclosure of cash, including restricted funds, are appropriate 10- 6 6 5 10- Potential Misstatements--Cash Disbursements Inaccurate recording of a purchase or disbursement Duplicate recording and payment of purchases Unrecorded disbursements 10- 5 5 Substantive Tests for Cash Balances 10- 7 7 6 Objectives for the Audit of Financial Investments Consider the inherent risks, including fraud risks Consider internal control over financial investments Determine the existence of recorded financial investments and that the client has rights to the investments Establish the completeness of recorded financial investments Determine that the valuation of financial investments is in accordance with GAAP Determine that the presentation and disclosure of financial investments are appropriate 10- 9 9 3 Controls Over Financial Investments Establishment .
