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The cash basis balance sheet includes three parts: assets, liabilities, and equity. The balance sheet does not track or record accounts payable, accounts receivable, or inventory with this method. So, your balance sheet does not include any unpaid invoices or expenses.
In cash-basis bookkeeping, those transactions reflect only the payments that have actually been made and cash physically received, so there is no audit of outstanding transactions. During the review, you may identify potential errors or improper accounting procedures.
A hedge funds manager generally has authority to access and transfer the funds assets. This authority can potentially be misused. To guard against this, many hedge funds undergo an annual financial audit by an independent auditor that includes verification of the existence of the fund assets.
You should compare the total amount of cash in the fund with the total amount of expenses recorded in the log, and identify and resolve any differences. You should also prepare a petty cash voucher, which is a document that summarizes the expenses and requests a reimbursement from your main bank account.
Through thorough fund audit procedures, a fund auditor will examine invoices, financial records, and other documentation to ensure that all balances and transactions have been accurately recorded and distributed.
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Auditors are finance professionals who perform audits they review financial statements, internal processes, and transaction records to assess accuracy and completeness. Internal auditors typically work for the company they audit and guide management on improving recording and reporting processes.
Key Takeaways. There are two accounting methods practiced by companies: the accrual accounting method and the cash accounting method. Only the accrual accounting method is allowed by generally accepted accounting principles (GAAP).
Financial statements prepared under the cash basis provide readers with information about the sources of cash raised during the period, the purposes for which cash was used and the cash balances at the reporting date. The measurement focus in the financial statements is balances of cash and changes therein.

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