CASH AND CASH EQUIVALENTS NO.21 HOW THE AUDITOR SHOULD VERIFY CASH AND CASH EQUIVALENTS? ANSWER: 1. Cash should be physically verified by the audit

How should cash be verified by the auditor on the balance sheet date?

Cash should be physically verified by the auditor as on the balance sheet date.

What is a surprise check in auditing cash balances?

The cash should be checked again sometime after the close of the year without giving notice of the auditor’s visit.

When there are multiple cash balances, how should they be verified?

All cash balances should be checked simultaneously if there are multiple cash handlers.

Why should the cashier be present during the cash count?

It is desirable for the cashier to be present while cash is being counted and he should sign the statement.

What should the auditor request if they cannot verify the cash physically?

The auditor should ask management to deposit the cash with the bank as on the balance sheet date.

What documents should the auditor obtain for verifying bank accounts?

The auditor needs to obtain bank reconciliation statements (BRS) for all bank accounts maintained by the entity.

Why is it important for the BRS to be signed?

The BRS should be signed by authorized personnel to assign responsibility in case of errors.

What should be checked regarding cheques issued but not yet presented?

The auditor should check all material reconciling items under cheques issued but not presented for payment.

What is the direct confirmation procedure in auditing?

The auditor contacts banks directly to confirm the amounts and resolve any discrepancies.

What are some of the required disclosures under Schedule III to the Companies Act regarding cash?

Cash and equivalents must be classified into balances with banks, cheques, cash on hand, and earmarked balances.

What should be disclosed about bank deposits exceeding 12 months?

Bank deposits with more than 12 months’ maturity shall be disclosed separately.

What additional disclosures are required regarding repatriation restrictions?

Repatriation restrictions on cash and bank balances must be separately stated.