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Essay Available:
Pages:
2 pages/β‰ˆ550 words
Sources:
3 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 11.23
Topic:

The Purpose of Audits

Research Paper Instructions:

Cash and cash equivalents must be managed and controlled properly for a business to run effectively. One of the first issues an auditor will encounter is the proper identification of accounts that should be included in an audit and all of the relevant financial statement assertions that concern these accounts. Complete the following: 1.Describe a minimum of 3 different bank accounts that a company could utilize. 2.What are the relevant financial statement assertions surrounding cash and cash equivalents and describe why they are important? 3.Define the types of internal controls that would be tested for the cash account, and give details or describe any specific tests that you might perform to ensure a thorough audit. Provide an audit plan for the cash accounts using each of the following audit steps in outline form with bullet points: •Step 1: Understanding your client and the industry •Step 2: Understanding and testing the internal controls and processes •Step 3: Gathering your evidence •Step 4: Expanding scope if necessary •Step 5: Testing

Research Paper Sample Content Preview:

The Purpose of Audits
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The Purpose of Audits
Describe a minimum of 3 different bank accounts that a company could utilize
A checking account offers access to cash for daily transactional needs and helps keep the cash secure. The company may debit cards or checks to make purchases or pay bills. These accounts come with checkbooks and ATM cards for flexibility of money. A savings account allows for the accumulation of interest on funds saved for future requirements. Savings accounts differ in interest rates, service fees, interest calculation method and opening deposit, while an investment account helps companies save for future investments, and may come with financial advisors to navigate a company through the investment process (CALCPA, 2010).
Financial statement assertion surrounding cash and cash equivalents and their importance
There are various financial statements such as balance Sheets, the Income /Profit & Loss (P&L) Statements and finally Cash Flow Statements. An Income Statement shows any revenue generated and expenses incurred over an accounting period. It shows net gain/ loss from the company's capital for that period. A balance Sheet represents a single date's snapshot of the company, often the last day of a quarter or year. This represents the worth of the company's assets, liabilities and company's equity as of that date. A Cash Flow Statement on the other presents a breakdown of activities that affects related to operations, financing and investments of an accounting period (IASCF and IASB, 2007).
Define the types of internal controls that would be tested for the cash account,
Several control measures should be put in place for internal control of cash: no individual should be permitted to handle checks without an additional control measure for accountability of all funds; a log (electronic/ manual) should be maintained a log of all money received; strict endorsement of checks upon receipt; an independent individual of should reconcile the deposit to the general ledger; management should approve opening and writing off of accounts and finally ideal depositing of checks every 24 hours (IASCF and IASB, 2007).
Tests to ensure a thorough audit
Two main tests can be carried out in order ensure an effective audi...
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