7-2 Final Project Submission

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Zachary Higgs

Southern New Hampshire University

ACC-411-R1480 Auditing Principles

October 02, 2022

Any organization or business needs to develop an audit program comprising thorough procedures for internal control of cash, including cash balances and receipts. An auditor must perform all the necessary procedures of internal controls in order to identify any shortcomings that might negatively affect RNS’ profits. Substantive data tests to detect lapping and analytical procedures must also be carried out to determine if the cash balances are correct (Allami & Jabbar, 2022). The audit program that could be used to assess RNS' internal controls for cash will mainly focus on key elements like directional risk for cash, primary cash assertions, main cash risks, and substantive cash procedures. This audit program may also focus on common cash work papers, risk of material misstatement for cash and common cash control deficiencies. During the auditing process, certain main relevant cash assertions must be looked at. They consist of accuracy, rights, completeness, existence and cut-off. Among the primary cash assertions, accuracy, existence and cut-off are considered the most important. This usually shows that there is an accurate cash balance and that only transactions in that period are incorporated.

Directional risk for cash entails the probable bias that a customer has about an account balance. A customer may desire to have an overstatement of assets and an understatement of liabilities because they all make the balance sheet look healthier. While performing the audit procedures, it is important to carry out activities like testing bank reconciliation to make sure cash is not overstated. There are various primary risks for cash which must be looked at in the audit program. These primary risks include cash being stolen, being overstated intentionally to cover up robbery and lack of cash accounts on the general ledger. Other risks for cash include misstatement of cash because of improper cut-off or mistakes in the bank reconciliation. It is also important to look at various cash control deficiencies because they are common in most organizations or businesses. These control deficiencies include a lack of timely bank reconciliations and the individuals performing the bank reconciliation not having adequate knowledge and skills to perform their duty (Hall, 2021). Control risk can be evaluated at a high level on every assertion because if it is evaluated at less than high, the control should be tested to support the lower risk evaluation. Evaluating risks at high is generally more effective compared to testing controls, and the inherent risk turns into the driver of the risk of material misstatement. Some of the standard audit tests that can be used include confirmation of cash balances, inspecting final deposits and disbursements and checking whether all bank accounts are listed in the general ledger.

References

Allami, F. A. J., & Jabbar, L. D. A. K. (2022). A Proposed Audit Program to Integrate Modern and Traditional Auditing Methods. Periodica Journal of Modern Philosophy, Social Sciences and Humanities, 6, 53-60.

Hall, C. (2021). Auditing Cash: The Why and How Guide. Retrieved from: https://cpahalltalk.com/auditing-cash/