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Kim Smith.
Kim Smith.- Posts
draiells- Topics: 91
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There’s a procedure in kaplan study text, which says:
”Count the petty cash in the cash tin at the year-end and agree the
total to the balance included in the financial statements to confirm
accuracy & valuation, and existence. ”In accordance to directional testing, my ques is:
since we are testing from outside a/c system through to a/c system (F/s figure) we would be verifying that the amount is not understated hence shouldn’t the correct assertion be COMPLETENESS.I agree, had we started from the F/S back to cash tin then it would be ”existence”
OR maybe ”agreeing” includes testing for both existence as well as completeness?
or that Since cash is asset so the risk is majorly about ”overstatement”
Kim Smith- Topics: 39
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I think there is a presumption that the auditor knows how much there should be in petty cash – e.g. if the company maintains an imprest system (a term you should know from FA/F3) then that is the amount that the auditor expects expects to find in the tin in cash (or represented by vouchers). There is no doubt that physical inspection of any asset is proof of its existence. Counting it will not confirm accuracy/valuation unless you know how much it is supposed to be – i.e. according to records.
I think it’s also correct to infer that “agreeing” in this case is two-way – but as it says at the beginning of the bank and cash section – the key assertions are “existence and valuation” – as you say – it’s an asset and the primary concern is overstatement.
Remember not every asset/liability/transaction will be tested for every assertion. And “petty cash” by name is immaterial – in practice it’s only because it could so easily not exist that the auditor audits it (!)
draiells- Topics: 91
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Thank you so much for the clarification!!!
Kim Smith- Topics: 39
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You’re welcome!
draiells
Kim Smith- The topic ‘Cash counts (petty cash) S.P ASSERTIONS’ is closed to new replies.