AUDIT OF CASH (CPAR OCT 2013 AP-7408)

PROBLEM NO.1
You are auditing general cash for the din company for the fiscal year july 31 2013. The client has not
prepared the july 31 bank reconciliation. After a brief discussion with the owner you agree to prepare
the reconciliation, with assistance from one of dion companys clerks. You obtain the following
information
General ledger
bank statement
Beginning balance
46,110
57,530
Deposits
250,560
Cash receipts journal
254,560
Checks cleared
(236,150)
Cash disbursement journal
(218,110)
July bank service charge
(870)
Note paid directly
(61,000)
NSF check
(3,110)
Ending balance
82,560
6,960
June 30 bank reconciliation
Information in general ledger and bank statement
Balance per bank
Deposit in transit
Outstanding checks
Balance per books

57,530
6,000
17,420
46,110

Additional information obtained is:

1. Checks clearing that were outstanding on june 30 totaled 16,920
2. Checks clearing that were recorded in the july disbursement journal totaled 204,670
3. A check for 10,600 cleared the bank, but had not been recorded in the cash disbursement
journal. It was for an acquisition of inventory. Dion uses the periodic inventory method
4. A check for 3,960 was charged to dion company but had been written on a different company
bank account
5. Deposit included 6,000 from june and 244,560 for july
6. The bank charged dion company account for a non-sufficient check totaling 3,110. The credit
manager concluded that the customer intentionally closed its account and the owner left the
city. The check was turned over to a collection agency.
7. A note for 58,000 plus interest was paid directly to bank under an agreement signed four
months ago. The note payable was recorded at 58,000 on dion company books
Based on the facts given, determine the following:
1. Outstanding checks on july 31
a. 9,980
b. 10,830
c. 13,940
d. 3,340
2. Deposit in transit on july 31
a. 6,890
b. 10,000
c. 6,000
d. 9,110
3. Adjusted cash balance on july 31
a. 6,980
b. 10,940
c. 3,870
d. 3,020
PROBLEM NO.3
The cash account of nunal company shows the following activites:
Date
debit

credit

balance

Nov.30
Dec.2
Dec.4

balance
nov. bank charges
nov. bank credit for notes
Receivable collected
nsf check
loan proceeds
dec. bank charges
cash receipts book
cash disbursement book

Dec.15
Dec.20
Dec.21
Dec31
Dec31

345,000
150

344,850

30,000
3,900
145,500
180
2,121,900
1,224,000

374,850
370,950
516,450
516,270
2,638,170
1,414,170

CASH BOOKS
Date
Dec 1
2
3
4
5
8
9
10
11
12
15
16
17
18
19
22
23
23
23
26
28
28
29
29
29
Totals
DATE
Dec
2
3
4
5
8
9
10
11

RECEIPTS
or no.
110-120
121-136
137-150
151-165
166-190
191-210
211-232
233-250
251-275
276-300
301-309
310-350
351-390
391-420
421-480
481-500
501-525
526-555
556-611
612-630
-

Amount
33,000
63,900
60,000
168,000
117,000
198,000
264,000
231,000
63,000
90,000
165,000
24,000
57,000
27,000
51,000
63,000
96,000

check no
801
802
803
804
805
806
807
808
809
810
811
812
813
814
816
817
818
819
820
821
822
823
824
825
826

222,000
15,000
114,000
2,121,900
BANK STATEMENT
CHECK
792
802
804
EC
805
CM 16
799
DM 57

PAYMENTS
payments
6,000
9,000
3,000
9,000
36,000
57,000
78,000
90,000
183,000
21,000
24,000
48,000
60,000
66,000
108,000
33,000
150,000
21,000
12,000
9,000
36,000
39,000
87,000
6,000
33,000
1,224,000
CHARGES
7,500
9,000
9,000
243,000
36,000
21,150
3,900

CREDITS
25,500
33,000
63,900
60,000
243,000
285,000
36,000
462,000
231,000

12
15
16
17
18
19
22
23
23
23
26
28
28
29
29
29

808
803
809
DM 61
813
CM20
815
816
811
801
814
818
DM 112
821
CM 36
820

90,000
3,000
183,000
180
60,000
18,000
108,000
24,000
6,000
66,000
150,000
360
9,000
12,000

Additional information
1. DMs 61 and 112 are for service charges
2. EC is error corrected
3. DM 57 is for an NSF check
4. CM 20 is for loan proceeds, net of 450 interest charges for 90 days
5. CM 16 is for the correction of an erroneous November bank charge
6. CM 36 is for customers note collected by bank in December
7. Bank balance on December 31 is P1,776,810
Based on the following proceeding information, determining the following
1. Outstanding checks at nov 30
a. 39,150
b. 28,650
c. 21,150
d. 46,650
2. Outstanding checks at dec 31
a. 459,000
b. 477,000
c. 441,000
d. 487,650
3. Deposit in transit at nov 30
a. 58,500
b. 145,500
c. -0d. 25,500
4. Deposit in transit at dec 31
a. 114,000
b. 139,500
c. 132,000
d. -05. Adjusted book balance at nov 30
a. 410,850
b. 345,000
c. 375,000
d. 374,850
6. Adjusted bank receipts for the month of dec
a. 2,297,400
b. 2,291,400
c. 2,303,400
d. 2,321,400
7. Adjusted book disbursements for the month of dec
a. 1,228,440
b. 1,246,440
c. 1,210,440
d. 1,246,620
8. Adjusted bank balance at dec 31
a. 1,449,810
b. 1,674,810
c. 1,431,810
d. 1,776,810
9. Unadjusted bank balance at nov 30
a. 550,060
b. 94,560
c. 1,776,810
d. 342,000
10. The best evidence regarding year-end bank balances is documented in the
a. Cutoff bank statement
b. Bank reconciliation
c. Interbank transfer schedule
d. Bank deposit lead schedule

63,000
255,000
24,000
57,000
145,500
141,000
96,000
222,000
15,000
36,000
-

PROBLEM NO.5
Fe company organized on march 1 2013, have a very poor internal control system. The companys
cashier is also its accountant. After 9 months of operations, the companys manager suspects that the
cashier accountant has been misappropriating company collections. You have been engaged to audit
the companys accounts to determine the extent of fraud, if any
You started the audit on November 15. On the date the cash on hand per your surprise count was
5,140. Also on the date, the bank confirmed that the balance of the companys current account was
26,328. Your examination of the records reveals that the check for 1,852 was outstanding on
November 15. The companys markup is 40% of sales.
Further examination of the companys records reveals the following balances at November 15 2013
Ordinary share capital
300,000
Share premium
20,000
Real property purchased for cash
200,000
Mortgage payable
80,000
Furniture and fixtures (of acquisition cost, 6,000
remains unpaid as of nov 15
29,000
note payable bank
32,000
accounts payable trade
46,284
expenses paid (excluding purchases
60,756
merchandise inventory at cost
93,920
accounts receivable trade
85,280
total sales
340,000
1. How much is the inventory purchases
a. 157,716
b. 293,620
c. 183,636
d. 251,636
2. How much was allocated from customer
a. 118,620
b. 254,620
c. 50,620
d. 340,000
3. How much is the cashiers accountability at November 15 2012
a. 131,228
b. 83,228
c. 145,225
d. 151,228
4. What is the adjusted bank balance as of November 2012
a. 31,468
b. 26,328
c. 29,616
d. 23,040
5. The cash shortage as of November 15 2012 totaled
a. 121,612
b. 101,612
c. 127,612
d. 206,992
PROBLEM NO.6
Your client, a successful small business, has never give much attention to a sound internal control. In
tis employ alex coopit, the companys cashier-bookkeeper. Alex handles cash receipts, makes small
disbursements from cash receipts, maintains accounting records, and prepares the monthly bank
reconciliation
The bank statement for the month ended march 31 2013 shows a cash balance of 590,000
The following checks are outstanding on march 31
No
7163
8,623
No
7284
7,320
No
7285
10,612
No
8722
6,322
No
8724
12,280

No

8733

6,200

The companys general ledger shows general ledger shows a cash balance of 696,499 on march 31
2013. Realizing that being cashier-accountant of the company he can easily misappropriate collections
conceal it, alex remove all the cash on hand in excess of 127,301, and then prepared the following
reconciliation in an effort to conceal this theft
Bank reconciliation
Balance per accounting records
Add:
outstanding checks
No. 8722
No 8724
No 8733
Total
Deduct cash on hand
Balance per bank statement march 31

696,499
6,322
12,280
6,200

20,802
717,301
127,301
590,000

1. How much was taken by the cashier-accountant

a. 30,555
b. 157,856
c. 4,000
d. 26,555
2. What is the amount of cash that should be on hand at November 15 2013
a. 127,301
b. 131,301
c. 157,856
d. 30,555
Theory
1. Who is responsible, at all times for the amount of pettry cash fund
a. General cashier
b. Petty cash custodian
c. President of the company
d. Chairman of the board of directors
2. The following are appropriate procedures for controlling the petty cash fund except
a. The monitor variations in different types of expenditures, the petty cash custodian
files petty cash vouchers by category of expenditures after replenishing the fund
b. To replenish the fund, the general cashier uses a company check to the petty cash
custodian, rather than cash
c. To determine that the fund is being accounted for satisfactory, surprise counts of the
funds are made from time to time by the internal auditor to other responsible official
d. Each individual to whom petty cash is paid is required to present signed receipts on
the petty cash custodian
3. What is the effect of not replenishing the petty cash fund at year-end and not making
appropriate adjusting entry
a. A detailed audit is necessary
b. The petty cash custodian should turnover the petty cash to the general cashier
c. Cash will be overstated ad expenses understated
d. Expenses will be overstated ad cash will be understated
4. As one of the year-end audit procedures, the auditor inspected the clients personnel to
prepare a standard bank confirmation request for a bank account that had been closed
during the year. After the clients treasurer and signed the request, it was mailed by the
assistant treasurer. What is the major flaw in this audit procedure
a. The confirmation request was signed by the treasurer

5.

6.

7.

8.

9.

10.

b. Sending the request was meaningless because the account was closed before yearend
c. The request was mailed by assistant treasurer
d. The CPA did not sign the confirmation request before it was mailed
On receiving the bank cutoff statement, the auditor should trace
a. Deposit in transit on the year-end bank reconciliation to deposits in the cash receipts
journal
b. Checks dated prior to year-end to the outstanding checks listed on the year-end
bank reconciliation
c. Deposit listed on the cutoff bank statement to deposit the cash receipts journal
d. Checks dated subsequent to year-end to the outstanding checks listed on the yearend bank reconciliation
An unrecorded check issued during last week of the year would most likely be discovered
by the auditor when
a. Check register for the last month is reviewed
b. Cutoff bank statement is reconciled
c. Bank confirmation is reviewed
d. Search for unrecorded liabilities is performed
To gather evidence regarding the balance per bank in bank reconciliation, an auditor
would examine all of the following except
a. Cutoff bank statement
b. Year-end bank statement
c. Bank confirmation
d. General ledger
An auditor compares information on cancelled checks with information combined in the
cash disbursement journal. The objective of this test is to determine that
a. Recorded cash disbursement transaction are properly authorized
b. Proper cash purchase discounts have been recorded
c. Cash disbursement are for goods and services actually received
d. No discrepancies exist between the data on the checks and the data in the journal
Cash shortage may be concealed by transporting funds from one location to another or by
converting negotiable assets to cash. Because of this, which of the collowing is vital
a. Simultaneous confirmation
b. Simultaneous bank reconciliation
c. Simultaneous verification
d. Simultaneous surprise cash count
When counting cash on hand, the auditor must exercise control over all cash and other
negotiable asset to prevent
a. Theft
b. Irregular endorsement
c. Substitution
d. Deposit in transit