Question

Suppose you are an auditor who wants to test a sample of recorded client cash receipts transactions with respect to the occurrence assertion. Clearly answer each of the following: A.) When testing this assertion, would you primarily be testing for overstatement or understatement of the recorded cash balance? Explain and be specific. B.) Describe how you would perform this test including precisely what accounting records and other evidence you would use. Explain and be specific.

Answer 1

While performing audit, auditor shall consider certain assertions such as occurance, measurement, presentation, valuation etc

While testing on occurance assertion both under statement and over statement shall consider

Occurance testing:

Audit procedures are used to determine whether transcation have been recorded within the correct reporting period

Basic procedures for testing of cash is

1)use the bank confirmation and material cash savings institution, certificate of deposit,compansating balances etc

2) conduct bank reconciliation statement

3)trace the bank balance on reconciliation to standard bank confirmation received from bank

4)trace the reconciled book balance to the general ledger,trial balance