Phil Lenton offers practical tips on taking a more risk-based approach to the audit of bank and cash. Show The withdrawal of Practice Note (PN) 16 Bank Reports for Audit Purposes in the UK (PN 16) has created an opportunity for auditors to exercise more professional judgement in determining whether it is necessary to obtain a bank confirmation in all circumstances. PN 16 stated that without obtaining a bank confirmation “it will not normally be practical to obtain sufficient appropriate audit evidence from other sources”. This led many audit firms to conclude that they had to obtain bank confirmations as a matter of course, regardless of the level of risk or other audit evidence that had been obtained. When PN 16 was withdrawn in 2017, the accompanying feedback statement noted that the Financial Reporting Council (FRC) proposals were “intended to encourage the auditor to apply their professional judgement as to when a confirmation report is required”. The feedback statement further stated that “deciding whether a confirmation report is required continues to be a matter of professional judgement for the auditor”. This appears to permit auditors to adopt a more risk-based approach, taking into account the auditor’s risk assessment of bank and cash. Understanding the entityAs part of performing that risk assessment, a key factor to consider is the understanding of the entity. This could include the number of bank accounts the entity has, with which banks, in what country and the reasons for those accounts. If the entity has numerous bank accounts with a number of different banks in multiple countries, this may indicate higher audit risk. This would especially be the case if this number or spread of bank accounts was particularly unusual for the type of entity. Find out moreMembers of the Audit and Assurance Faculty, International Standards and subscribers of Faculties Online Download the complete article:Auditing bank and cash Non-Members To read the complete article, subscribe to Faculties Online or join the Audit and Assurance Faculty and get access to this article in full, plus all future publications, events, webinars and services. The Audit Checklist should be used, and each box marked in the negative should result in an audit recommendation. Audit each account separately. Check off items in red ink as they are reviewed. Do not correct errors. Ask the responsible financial officer to correct errors. After errors have been corrected, and the auditor is satisfied that the financial accounts are correct, the auditor needs to denote the ending date of the audit. If a manual ledger and check register exists, draw a double line across the ledger and checkbook register where the audit concludes and sign and date using red ink, “Audited by (name) on (date).” If a computerized accounting program is used, attach a copy of the cash account and the last page of the check register to the audit report filed with the secretary minutes, sign and date using red ink, “Audited by (name) on (date).” The auditor ensures that the association’s financial transactions have been accurately recorded
For more information about PTA audit procedures, refer to Bylaws for Local PTA/PTSA Units, Article VI, Section 8 The auditor should feel free to contact the treasurer if there are questions or issues needing clarification. If an error in recording a transaction is found, the auditor needs to recommend the entry be corrected. Any corrections made as a result of the audit need to be listed on the next treasurer’s report. The auditor should not be punitive in the report/recommendations. Difference of opinion as to process should not result in a recommendation if the treasurer’s records are correct. Some examples of recommendations are:
If assistance is needed, contact the council or district PTA. At any time during the process, California State PTA also may be contacted for information and assistance. What is the audit procedure for bank?The auditor examines financial transactions, bank wires, automated clearing house (ACH), and the bank account monetary flow to ensure the accuracy, completeness, and timeliness of transaction recording. Financial and regulatory reports are examined to determine if they were filed as required.
What is the last procedure for audit of payments?Disclosure. The final step to an AP audit is to ensure that all transactions and activity were properly disclosed. This means your payable balance must be recorded in your year-end financial statements. An auditor will look for disclosure by inspecting things like current liability and cost of goods calculations.
What is the example of audit of bank?Bank Audit is the procedure of reviewing the services and procedures adopted by banks. Its a routine process of reviewing all the items of expenses and incomes along with the balance sheet audit where each item of balance sheet has to be reviewed.
What are the audit procedures for accounts payable?There are four stages in a typical accounts payable auditing process: planning, fieldwork, audit reporting, and follow-up review.
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