Cash Cycle Summary and Controls

Flashcards covering key concepts regarding cash cycle summary, relevant assertions, and controls related to cash accounts.

What is a key concern regarding the existence of cash in a company's accounts?

Does the reported cash really exist?

What might indicate that cash does not exist in the company's bank accounts?

Cash could have been stolen by employees or management could overstate cash balances.

What control procedures are used to ensure cash existence?

Monthly bank reconciliations and cash receipt procedures.

What is a significant concern related to cash valuation?

Is the cash valued properly?

What issue may arise with cash balances held in foreign countries?

Cash balance may not be properly translated using the correct spot rate.

Who is responsible for reviewing translation adjustments for foreign currency cash balances?

The treasurer.

What is a concern associated with the presentation and disclosure of cash balances?

Are the reported cash balances presented properly and have appropriate disclosures been made?

What control is implemented to ensure that restrictions on cash balances are disclosed?

The corporate secretary reviews cash footnote quarterly for restrictions.

What is the initial step when cash arrives at a company?

Two people should open the mail with cash receipts.

What should happen to checks immediately after they are removed from the envelope?

Checks should be endorsed immediately.

What is the purpose of having an independent employee reconcile cash remittance listings?

To ensure accuracy between cash remittance listing, payments recorded in A/R, and deposit slips.

What authorization is required for cash payments in the purchasing cycle?

Authorization from the A/P department upon a three-way match between the Purchase Order, Receiving Report, and invoice.

What must be done with checks before they are printed?

A voucher packet must be prepared.

What is a critical control related to bank reconciliations?

Monthly bank reconciliations should be performed by employees outside of normal cash operations.

What is the first step in substantive testing of bank reconciliations?

Confirm the 'balance per bank' for each bank account with the financial institution.

What must clients do to allow auditors to confirm bank balances?

Clients must provide authorization to release information to the auditor.