Question

A CPA is engaged in the audit of the financial statements of a large manufacturing company with branch offices in many widely separated cities. The CPA was not able to count the substantial undeposited cash receipts at the close of business on the last day of the fiscal year at all branch offices.

     As an alternative to this auditing procedure used to verify the accurate cutoff of cash​ receipts, the CPA observed that deposits in transit as shown on the​ year-end bank reconciliation appeared as credits on the bank statement on the first business day of the new year. He was satisfied as to the cutoff of cash receipts by the use of the alternative procedure.

a. State the condition (either change in accounting principle, failure to follow GAAP, none, reporting involving other auditors, or scope of the audit has been restricted)

b. State the materiality level (either Material, immaterial, highly material, material or highly material, or not applicable)

c. List any additional information needed (either amount of loss, auditor's preliminary judgement, client explanation in a memo, or the size of the misstatement)

Answer 1

- The Cash in hand should be counted at the close of the business on the last day of the financial year. If that is hat Practicable the Cash balance is han Should be fully cheetsed on some Other day close to the year endingde In the case of balances ad branches a cortfo should be obtained from the branch manas of person with whom Imprest balances wer kept Confinning that balances did exist- (ANSA) Without these An auditos Can adopt. alternative procedeuse by checking the Bank recepts and statements etc solt is allowealoce. It is not aguast GAAP rules.

As the necouting Principale CGTAAP) for Homs in încome statements that Could affect the not Income from Positive of negative are also longo dored as material you AN & Condos son: It does not alreed Me recono statomar Poantrudy of negatively. Cash balances are kept to branch Verofred through the reciept of Bauta But liss vortation of sales and → if it shows the Barb, balance than the actual balance at the close day > is the worlation of GAAP Adolatronal Informatron: Some of the business man have started Mee Practice of depositing to the bauts The entire Cash balance at the close of the year. It is an automatic

uditos methoode of checking Cash balance which not only assists the auditor But a helps the client conforming that the balance Shawn by the Cash book was actually so has the client Shauld be advised to the practic