## Audit of Cash and Cash Equivalents
Audit of cash covers two sub-areas: physical cash (Existence & Completeness) and bank balances (BRS + Direct Confirmation).
---
### A. Physical Cash – Existence & Completeness
#### 1. Surprise Cash Count
- Conduct without prior notice – can be done on the last day of the year or after year-end.
- Count both the main cashier and petty cashier balances.
#### 2. Simultaneous Checks
- Check all cash locations simultaneously to prevent transfer of cash between locations.
- Verified against the cash account.
#### 3. Cashier's Presence is Mandatory
- Cashier must be present during the count.
- Obtain a signed confirmation document stating details of balance and denominations.
#### 4. Cash Sensitivity Analysis
- Analyse monthly cash flows to identify trends or unusual variations.
- Ask management for explanations if significant variations found.
#### 5. Temporary Advances
- Verify that temporary advances are included in the cash balance with proper approval.
#### 6. Rough Cash Book
- If entity maintains a rough cash book, test entries by comparing with the formal Cash Book.
---
### B. Bank Balances – Bank Reconciliation Statement (BRS)
| Step | Procedure |
|---|---|
| 1 | Obtain and review BRS for all bank accounts; understand the preparation process |
| 2 | Match balance in Bank Book with Bank Statement |
| 3 | Stale cheques (>3 months old) should be removed from reconciliation and shown as a liability |
| 4 | Verify deposits not credited by bank using deposit slips and subsequent bank statements |
| 5 | Review uncleared cheques – seek explanation for overdue items; verify revenue recognition on material reconciling items |
| 6 | Ensure material unpresented cheques are cleared or explained |
| 7 | Check for Debit/Credit notes not yet accounted for; ensure proper adjustment is made |
---
### C. Direct Bank Confirmation (SA 505)
1. Obtain confirmation for all bank accounts at period end.
2. Investigate any discrepancy between confirmed balance and book balance.
3. If bank is unresponsive:
- Verify balance against bank statement received by company, OR
- Send a team member to the bank personally, OR
- Use net banking login in the presence of company personnel.
---
### D. Valuation – Foreign Currency Bank Accounts
- Bank accounts holding foreign currency must be restated at the closing exchange rate.
- Applicable standard: AS 11 / Ind AS 21.