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The audit of cash transactions entails detailed checking of the record of transactions for verifying that entries have been made in the books of account according to the system of accounting which is being regularly followed and the books of account balance as under :
(a) Vouching;
(b) Posting;
(c) Casting, cross-casting and tracing; and
(d) Reconciliation, scrutiny, confirmation, etc.
When accounts are checked in the foregoing manner, they may disclose one or more mistakes or manipulations in the accounts of different types stated below.
(a) Vouching;
(b) Posting;
(c) Casting, cross-casting and tracing; and
(d) Reconciliation, scrutiny, confirmation, etc.
When accounts are checked in the foregoing manner, they may disclose one or more mistakes or manipulations in the accounts of different types stated below.
- Errors of omission or commission which are accidental, e.g., failure to enter some sales invoices, mistakes made in computing amounts payable for purchase, etc.
- Cases of deliberate omission or commission:
♦ to cover up a defalcation of cash, e.g., amount received from X having been posted to the account of B and subsequently, the amount paid by Y having been misappropriated; or
♦ to overstate profit or assets, e.g., no provision having been made for outstanding liabilities or the goods already sold before the close of the year having been included in closing stock;
♦ to overstate liabilities and understate assets, with a view to providing a basis for effecting fictitious payments in the former case and misappropriation of the sale proceeds in the latter case.
♦ Errors of principle such as revenue expenditure having been charged to capital.
♦ Compensation errors, e.g., “Furniture Account”, having been undercast by $500 and “Repairs Account” overcast by the same amount.
♦ to overstate profit or assets, e.g., no provision having been made for outstanding liabilities or the goods already sold before the close of the year having been included in closing stock;
♦ to overstate liabilities and understate assets, with a view to providing a basis for effecting fictitious payments in the former case and misappropriation of the sale proceeds in the latter case.
♦ Errors of principle such as revenue expenditure having been charged to capital.
♦ Compensation errors, e.g., “Furniture Account”, having been undercast by $500 and “Repairs Account” overcast by the same amount.
