Concept Map of Cash

Account Cash
Standard(s) PAS 7 Cash Flows shows the historical changes in cash and cash
equivalents during the period. It is an integral part of a complete
set of financial statements and is used in conjunction with other
financial statements in assessing the ability of an entity to
generate cash and cash equivalents, the timing and certainty of
their generation, and the needs of the entity to utilize those cash
flows.

Initial Recognition At initial recognition, an entity measures a financial asset or a

financial liability at its fair value plus or minus, in the case of a
financial asset or a financial liability not at fair value through
profit or loss, transaction costs that are directly attributable to
the acquisition or issue of the financial asset or the financial
liability.
Subsequent Measurement Financial asset or financial liability is measured initially at fair
value. Subsequent measurement depends on the category of
financial instrument. Some categories are measured at
amortized cost, and some at fair value. In limited circumstances
other measurement bases apply, for example, certain financial
guarantee contracts.
Impairment At the end of each reporting period, an entity is required to
assess whether there is any indication that an asset may be
impaired (i.e. its carrying amount may be higher than its
recoverable amount). IAS 36 has a list of external and internal
indicators of impairment. If there is an indication that an asset
may be impaired, then the asset's recoverable amount must be
calculated. [IAS 36.9]

The recoverable amounts of the following types of intangible

assets are measured annually whether there is any indication
that it may be impaired. In some cases, the most recent detailed
calculation of recoverable amount made in a preceding period
may be used in the impairment test for that asset in the current
period: [IAS 36.10]

an intangible asset with an indefinite useful life an intangible

asset not yet available for use goodwill acquired in a
business combination
Derecognition Derecognition questions can arise with respect to all types of
assets and liabilities. This project focuses on financial
instruments. Questions regarding derecognition of assets and
liabilities often arise in the context of certain special purpose
entities and whether those entities should be included in a set of
consolidated financial statements.
FS Assertions - Balance ACERV
 Completeness- All assets, liabilities and equity interests
that should have been recorded.
 Existence- assets, liabilities and equity interest exist.
 Rights and Obligations- the entity holds or controls the
rights to assets, and liabilities are the obligations of the
entity.
 Valuation and Allocation- assets, liabilities and equity
interests are included in the financial statements and
appropriate amounts and any resulting valuation or
allocation adjustments are appropriately recorded.
FS Assertions Transactions TOCCAC
 Occurrence- transactions and events that have been
recorded have occurred and pertain to entity.
 Completeness- all transactions and events that should
have been recorded have been recorded.
 Cut-Off- transactions and events have been recorded in
the correct accounting period.
 Accuracy- amounts and other data relating to recorded
transactions and events have been recorded
appropriately.
 Classification- Transactions and events have been
recorded in the proper accounts.

Audit Risks or Threats Audit risk is made up of two main components, namely the risk
of material misstatement and its respective detection risk.
Risk of Material Misstatement:
‍Risk of material misstatement can be further broken down by its
own two components, which include:
 Inherent risk- risks that can’t be detected or managed by
the organization’s internal controls.
 Control risk- risk that an organization’s internal controls
are unable to detect or rectify a significant error or
misstatement within its financial statements.
 Detection Risks- possibility of an auditor failing to detect
material misstatements
Controls that should be in Place Key Internal Controls
 Segregation of Duties: Authorizing a transaction, the
recording of a transaction and maintaining custody of
the related assets should all be handled by different
personnel.
 Accountability: Ensure all cash transactions have been
authorized, have been properly accounted for, and have
been documented properly.
 Reconciliations: It is important to reconcile all bank
accounts monthly to ensure all transactions are being
recorded accurately and completely.

 Monitoring: A review process is crucial to ensure controls

 are in place and running effectively
Appropriate Audit Procedures 1. Conduct a cash count of undeposited collections, petty cash,
and other funds.
Obtain custodian's signature to acknowledge return of items
counted.
Reconcile items counted
Trace undeposited with general
collections countedledger
to bank balances.
reconciliation.
Follow up dispositions of items in cash counted:
a) Undeposited collections should be traced to bank
deposits.
b) Checks accommodated in petty cash should be deposited
after the count to establish their validity.
c) IOUs in the petty cash should be confirmed and traced to
collections in the next payroll period.
d) Expense vouchers should be traced to the succeeding
replenishment voucher.
e) Coordinate cash count with count of marketable securities
and other negotiable assets of the client.
f) Obtain confirmation of year-end fund balances of cash not
counted in branches or other offices.
2. Confirm bank balance by direct correspondence with all banks
in which the client has had deposits and loans during the year.
3. Obtain bank reconciliation.
a) Check arithmetical accuracy of reconciliation.
b) Trace balance per book to the general ledger balance of
cash account.
c) Trace balance per bank-to-bank statement and compare
with amount confirmed by bank.
d) Establish authenticity of reconciling items by reference to
their respective sources, like:
i) Bank debit or credit advice.
ii) Duly approved journal vouchers
e) Investigate checks outstanding for a long period of time.
i) Consider adjustment, especially if the check is already
stale.
ii) Consider the possibility of an erroneous preparation
of the check.
iii) Investigate any unusual reconciling items.
iv) Where internal control over cash is weak, consider
preparing a proof of cash reconciliation.
4. Obtain cutoff bank statement showing the client's
transactions with the bank at least one week after the
reporting date, and:
a) Trace year-end reconciling items, like:
i) Deposit of the year-end undeposited collections.
ii) Completeness of year-end outstanding checks.
iii) Corrections of bank errors.
b) Examine supporting documents of year-end outstanding
checks that did not clear in the cutoff bank statement.
5. Obtain a list of interbank transfers of funds a few days before
 and after the reporting date.
a) Vouch supporting documents.
b) Ascertain that the related receipts and disbursements
were booked by the client within the same day or at least
within the same month.
6. Test reasonableness of cutoff by.
a) Comparing dates of checks returned with cutoff bank
statement to dates of recording in the cash disbursements
register.
b) Tracing receipts recorded a few days before the reporting
date to bank deposits.
7. Inspect savings account passbook and certificates of deposits.
a) Reconcile with book balances.
b) Update interest earned posting on passbooks, if
necessary.
c) Compare balances with bank confirmation reply.
8. Determine any restrictions on availability of cash.
9. Determine propriety of financial statement presentation and
adequacy of disclosures