Examine the cash and financial instruments balances


Response to the following problem:

The following audit procedures are concerned with tests of details of general cash and financial instruments balances:

1. Obtain a standard bank confirmation from each bank with which the client does business.

2. Compare the balance on the bank reconciliation obtained from the client with the bank confirmation.

3. List the check number, payee, and amount of all material checks not returned with the cutoff bank statement.

4. Review minutes of the board of directors meetings, loan agreements, and bank confirmation for interest-bearing deposits, restrictions on the withdrawal of cash, and compensating balance agreements.

5. Prepare a four-column proof of cash.

6. Compare the bank cancellation date with the date on the cancelled check for checks dated on or shortly before the balance sheet date.

7. Trace deposits in transit on the bank reconciliation to the cutoff bank statement and the current year cash receipts journal.

8. Compare the price per share on an equity investment at year-end according to the schedule of investment activity to the quoted market price according to an outside pricing source.

9. Confirm the balance of financial instruments at year-end with the broker-dealer service organization used by the client to manage their investment portfolio.

Required:

Explain the objective of each audit procedure.

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Auditing: Examine the cash and financial instruments balances
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