Question

1. Cashier has done reconciliation as of October 31st and looks like there are some thefts going on. Also the cashier is the only one receiving cash and doing reconciliation. If the cashier’s September 30 reconciliation is known to be accurate and you start your audit on November 10, what specific substantive audit procedures would help you detect the missing money?

Answer 1

1.The most likely methods used to conceal the theft would be:

·Not listing all outstanding checks on the bank reconcilements.

·Under-footing outstanding checks shown on the reconciliation.

·Subtracting an item from the bank balance that should be added to the book balance.

2.Some of the control procedures that would have been effective in preventing or detecting the irregularity would include:

·Someone other than the cashier should trace cash receipts to the deposits in the bank.

·Someone other than the cashier should be responsible for preparing the bank reconciliation.

3. Additional audit procedures that might be performed:

·Prepare an independent bank reconciliation as of November 30. Verify the items on the reconcilement by obtaining a cut-off statement from the bank, or make arrangements to receive the 12-31 bank statement directly from the bank. Foot all the items on the bank reconcilement.