PRACTICAL CASH AND BANK AUDIT (Test 1)
Questions for practical cash and bank audit as follows:
ToP Trading Company used QuickBooks accounting system to prepare financial statements, and company customizes reports for internal purposes. Daily cash report (control cash receipt and cash payment, its bank and cash balance) is customized and printed from QuickBooks accounting system for financial manager approval.
Daily cash report on 25 October 2016 shows that cash and bank movement is increase by $20,000. Internal auditor suspected that this movement is incorrect.
You are required to check this cash and bank movement for daily cash report on 25 October 2016, and you may assume that beginning cash and bank balance on 25 October 2016 is correct. Define ways and procedures that you should use to check this movement.
Recently ANA Premium Company doesn’t prepare bank reconciliation to compare bank balance per its accounting system (company used Peachtree accounting system). For this month (Oct), company prepare bank reconciliation to compare bank balance per accounting system, but after any adjustments (items or errors made by ANA or Bank Company), it still shows variance of $1,000.
Based on your professional judgment, conclude main reason about this variance.
After review, it shows inappropriate bank reconciliation, board of company requires internal audit helps to gather bank information and prepare bank reconciliation again. Below is information for bank reconciliation.
On 31 July 20X7 the balance on Sok David’ bank ledger account was a debit of $52 compared with a credit balance of $134 shown by his bank statement. He discovered the following:
- Chques drawn by Sok David during July, amounting to $356, $1,732and $196, had been entered in the day books but had not been presented at the bank by the end of the month.
- Sok David had forgotten to enter into the day books a standing order for $50.
- The bank had incorrectly credited Sok David’s account with a dividend receipt of $25 relating to another customer.
- Bank charges of $105 shown on the bank statement had not yet been entered in the day books
- Cheques received from customers amounting to $1,211were entered in the day books on 31 July but were not credited on the bank statement until 3 August.
- Direct credits from customers of $180 and $31 has been paid direct into the bank, but no entry had been made in the day books
- The cheque payments day book for July had been undercast by $1,000.
- The statement shows an item’ return cheque $72’. This has not yet been accounted for in the day books.
Adjust the bank ledger account and prepare the bank reconciliation statement at 31 July 20X7.