How An Auditor Evaluates The Different Cash Accounts Of A Business Firm?
There are many ways by which a business organization arranges means for its cash deposits. Some of these includes
- The Cash Remittance policy. This amounts to the money transferred by different branches or agents to the main office of the company by indirect means and does not include any physical methods like direct cash payment or cheques.
- An auditor should definitely verify such remittance by examining the cash or pass book during regular intervals as to see whether these amounts are actually received or not.
- The settlement dealings associated with the head office should also be recognized to find out whether is it safe or not.
- Further, check for the pay-in-slip, if the cash is directly transferred into the bank.
- Moreover, it is also necessary to know if the money transaction done by one party is reversed in the coming year or vice versa.
- Dealing with the petty cash.
- All the petty cash must be thoroughly verified with the corresponding petty record book.
- Do not forget to make note of the balance in the general ledger each time the petty cash account is checked.
- It is also essential to vouch for the previous transaction records to ascertain if any fictitious payments are made in between.
- All the methods adopted for verifying the cash in hand can also be used for evaluating this too.
- Going for the bank balance.
- For analyzing the details of company accounts with the bank, bank passbook is the available documentation and so make a comparison between the balance written in it and that with the business cash book.
- Verify all the settlement papers with that of the bank statements or with corresponding pass book of the relevant period.
- Further, the auditor can proceed to get the written note regarding the business balance directly from the bank itself.
- Take note of the balance made in the cash book is the same as in the balance sheet under the topic ‘cash and the bank’ and not as the ‘remaining amount in the passbook’.
- In addition to these, all the pending cheques to be collected and the outstanding ones recorded in the books should be evaluated by the auditor to ensure if these are true. Pending cheques of over six months of age should be inquired.
- All the FD’s, Dividend accounts or so must be analyzed in details to know the Genuity of the accounts.