Audit of Cash and Cash Equivalents

Introduction and Fundamental Concepts00:00:01

Introduction to auditing cash and cash equivalents. Emphasis on relying on financial accounting standards as the foundation, utilizing imagination to break down complex audit problems, and maintaining a calm approach to overwhelming scenarios.

Defining Cash and Cash Equivalents00:02:22

Explanation of cash components, including cash in bank and cash on hand. Discussion of restricted vs. unrestricted cash, the treatment of various cash funds, and the specific criteria for cash equivalents (e.g., debt instruments maturing within 3 months).

Measurement and Petty Cash Fund Procedures00:10:40

Overview of initial and subsequent measurement of cash at face value, with exceptions for foreign currency and banks undergoing bankruptcy. Detailed breakdown of journal entries for petty cash funds including establishment, disbursements, replenishment, and handling shortages or overages.

Bank Reconciliation and Proof of Cash00:22:00

Clarification that clients, not auditors, should prepare bank reconciliations. Overview of book and bank reconciling items (e.g., credit/debit memos, deposits in transit, outstanding checks). Introduction to 'Proof of Cash' as an audit tool for substantive procedures.

Practical Problem Solving: Petty Cash00:29:10

A guided walkthrough of an audit problem involving petty cash verification, calculating shortages or overages, and adjusting petty cash fund balances based on discovered evidence and employee transactions.

Practical Problem Solving: Bank Reconciliation00:39:13

Application of bank reconciliation techniques to audit a company's cash accounts, identifying book and bank errors, handling NSF checks, and performing compound journal entries to adjust the books at year-end.