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The primary relevant cash assertions are: that the cash balance exists, that its accurate, and that only transactions within the period are included.
In this article, we will discuss the most important steps to take when auditing cash flow statements. 1 Understand the business. 2 Plan the audit. 3 Test the controls. 4 Perform the substantive procedures. 5 Review the presentation. 6 Report the findings. 7 Heres what else to consider.
All cash received should be accounted for immediately. All received cheques should be crossed immediately on receipt. Cash receipt should be issued to debtors and daily reconciliation of account should be done where the debtors pay cash on daily basis. All cash receipts should be deposited in bank on a daily basis.
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.
Substantive Procedures for Cash Confirm cash balances. Vouch reconciling items to the subsequent months bank statement. Ask if all bank accounts are included on the general ledger. Inspect final deposits and disbursements for proper cutoff.
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Completeness. To ascertain that all records reflect the expenditure in the financial statements, an auditor may examine cash receipts and disbursement records for a period before the balance sheet date. This prevents deliberate misstatement of fact and establishes errors committed by the person handling the records.
Verification of Cash Balances The auditor should carry out physical verification of cash at the date of the balance sheet. However, if this is not feasible, physical verification may be carried out, on a surprise basis, at any time shortly before or after the date of the balance sheet.

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