Summary
AUE3761 Bank and cash cycle summary
- Institution
- University Of South Africa (Unisa)
Contains a summary of the characteristics and activities in the cycle, as well as test of controls, and substantive procedures.
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UNIVERSITY OF JOHANNESBURGDEPARTMENT OF ACCOUNTANCY
AUDITING 300/BCTA
2018
MODULE: Bank & Cash Cycle
, BANK AND CASH CYCLE
1.1 INTRODUCTION OF THE TOPIC
Bank and cash transactions occur on a daily basis in all businesses. Although the cash and
bank balances may not individually be significant, annually the volume of cash and payment
transactions and bank deposits can be significant to the entity.
1.2 CHARACTERISTICS OF THE CYCLE
The bank and cash cycle overlaps with most of the cycles that will be covered during the first
semester. The previous cycles which covered the revenue and receipt cycle as well as the
purchase and payroll cycle, specifically overlaps in terms of the cash received with a cash
sale, the cash received from debtor payments and the payments of expenses or creditors. As
the specific controls and test of controls over cash receipts and disbursements were dealt with
extensively in the individual modules of the relevant cycle, this module focus only on the cash
management controls and the substantive audit procedures the auditor should perform to audit
cash and bank balances.
The importance of the bank and cash cycle from an audit point of view will depend on the
nature of the client and its operations. The audit of cash transactions will be more important
at banks and retailers as at entities who mainly do business on credit. There will therefore be
additional control aspects to be considered regarding the handling and custody of cash when
a client has significant amounts of cash on the premises.
Large amounts of cash retained by a company create the risk of theft and fraud by outsiders
or even by employees and therefore the physical safeguarding of cash held within the
company should be sound.
In the modern company, the source of actual cash is generally limited to petty cash funds used
for very small purchases (apart from retailers that accumulate large amounts of cash through
sales). When cash transactions represent a material part of the business, the auditor must
adapt his/her audit approach to include test of controls and substantive procedures on this
cycle.
1.2.1 CASH BALANCES
Cash balances comprise the following:
Cash
Petty cash
Till float
Unbanked receipts
1.2.2 BANK BALANCES
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