Auditing Cash and Related Procedures

These flashcards cover key concepts from the lecture on auditing cash, including procedures, terminology, and the importance of thorough auditing practices.

What is the first step in auditing cash according to the lecture notes?

Call the bank and ask for the cash amount the company has.

Why is a bank confirmation not sufficient in cash auditing?

Because it does not account for outstanding checks or deposits in transit.

What is bank reconciliation?

The process where a company compares its cash balance in accounting books with the amount shown on its bank statement to ensure accuracy.

What does 'Check Kiting' refer to in auditing?

The practice of transferring money between accounts to overstate cash at year-end.

What are cash equivalents?

Investments that are sufficiently liquid and stable to be considered cash, such as three-month treasury bills.

What document is key in substantive testing of cash balance?

Bank reconciliation.

What is the purpose of management representation letters?

To document everything management has told the auditors about the audit, confirming their assertions.

What are the two types of subsequent events mentioned in the lecture?

Type I Subsequent Events (adjust) and Type II Subsequent Events (disclose).

What must auditors do if they discover an omitted procedure post-reporting?

They must take action to assess the significance of the omission and potentially perform the omitted procedures.

What role does segregation of duties play in cash management?

It helps prevent an individual from being able to steal cash by dividing responsibilities among different people.