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AUDITING CASH AND INVESTMENTS

1. CASH

Audit objects :

- existence recorded cash balances exist at the balance sheet date.

- co!leteness recorded cash balances incl"de the e##ects o# all cash

transactions that ha$e occ"rred% &ear ' end trans#er o# cash bet(een ban)s are

recorded in the !ro!er !eriod.

- ri*hts and obli*ations the entit& has le*al title to all cash balances sho(n at

the balance sheet date.

- $al"ation recorded cash balances are reali+able at the ao"nts stated on the

balance sheet and a*ree (ith s"!!ortin* sched"les.

- !resentation and disclos"re cash balances are !ro!erl& identi#ied and

classi#ied in the balance sheet% lines o# credit, loan *"arantees and other

restrictions on cash balances are a!!ro!riatel& disclosed.

EMA/S0

o A hi*h $ol"e o# cash transactions res"lt in a hi*h inherent ris).

o Controls o$er cash transactions are "s"all& stron* and are tested in connection

(ith the a"dits o# sales and !"rchases.

o e*"lar ban) reconciliations are an i!ortant control o$er the !re$ention and

detection o# #ra"d and error.

o The "se o# i!rest2 acco"nts #or !ett& cash and #or !a&roll and di$idend

che3"es is a #"rther control o$er sa#e*"ardin* cash balances.

o Cash balances are "s"all& relati$el& sall b"t si*ni#icant beca"se o# their

i!ortance #or li3"idit&.



o The sall balance eans that a"ditors tend to ado!t a !redoinantl& s"bstanti$e

a!!roach to the a"dit o# cash balances.

o Anal&tical !roced"res are little "sed in the a"dit o# cash balances.

o C"t ' o## tests are !er#ored in connection (ith the c"t ' o## o# sales and

!"rchases and (ith the cash co"nt.

o An i!ortant ite to chec) is the ban) trans#ers.

o 4rinci!al s"bstanti$e a"dit !roced"res a!!lied to balances are0 co"ntin* cash%

con#irin* balances (ith ban)s% testin* and closin* ban) reconciliation% tracin*

o"tstandin* ites in the reconciliation to the next !eriod5s stateent.

o In co"ntin* cash, the a"ditors sho"ld control all cash #"nds and co"nt the in the

!resence o# the c"stodian.

o In exainin* the s"bse3"ent !eriod5s ban) stateent, the a"ditors "st consider

the !ossibilit& o# (indo( dressin*.

o Teein* and ladin* is the concealent o# the isa!!ro!riation o# cash b& the

"se o# s"bse3"ent recei!ts.

o Teein* and ladin* is #acilitated (here one indi$id"al handles cash and

aintains the sales led*er.

o The a"ditors sho"ld be alert to dela&s in creditin* che3"es to debtors and to

discre!ancies bet(een d"!licate de!osit sli!s and cash recei!ts 6o"rnal details.

o 4ett& cash need not to be a"dited (here the !ett& cash transactions are

iaterial, altho"*h an& a"ditors still do so as a atter o# ro"tine.

o A"ditin* !ett& cash in$ol$es $o"chin* reib"rseents and co"ntin* the

balance.

o I!rest ban) acco"nts are "s"all& a"dited b& recocilin* the balance.

7. INVESTMENTS



Audit objects :

- existence recorded in$estent balances re!resent in$estents that exist at the

balance sheet date% in$estent re$en"es, *ains and losses res"ltin* #ro

transactions and e$ents that occ"rred d"rin* the !eriod.

- Co!leteness all in$estents are incl"ded in the balance sheet in$estent

acco"nt% the !ro#it and loss stateent e##ects o# all in$estent transactions and

e$ents d"rin* the !eriod are incl"ded in the !ro#it and loss stateent acco"nts.

- i*hts and obli*ations all recorded in$estents are o(ned b& the re!ortin*

entit&.

- Val"ation in$estents are re!orted on the balance sheet at $al"ation, lo(er o#

cost or net reali+able $al"e or cost, as a!!ro!riate #or !artic"lar in$estents%

in$estent re$en"es, *ains and losses are re!orted at !ro!er ao"nts.

- 4resentation and disclos"re in$estent balances are !ro!erl& identi#ied and

classi#ied in the #inancial stateents% a!!ro!riate disclos"res are ade

concernin* related !art& in$estents, the basis #or $al"atin* in$estents and the

!led*in* o# in$estents as collateral.

EMA/S0

In$estents are holdin*s o# sec"rities s"ch as shares and debent"res iss"ed

b& other entities.

The !"r!ose o# holdin* in$estents a& be to !ro$ide a hoe #or #"nds

c"rrentl& s"r!l"s to o!eratin* needs or to sec"re a relationshi! (ith other entit&.

In$estents in *ro"! entities are re3"ired to be consolidated (ith the

#inancial stateents o# the !arent entit& to !rod"ce *ro"! #inancial

stateents.



Inherent ris)s incl"de the ne*otiabilit& o# doc"ents o# title and the !ro!er

classi#ication o# sec"rities de!endent on ana*eent intent.

The in#re3"enc& o# in$estent transactions leads to a !redoinantl&

s"bstanti$e a!!roach to their a"dit.

The !rinci!al controls relate to those o$er sa#e)ee!in* and the

aintenance o# an in$estent re*ister.

Tests o# details o# transactions are rele$ant in $eri#&in* the occ"rrence o#

recorded in$estent balance.

Sec"rities on hand at the end o# the &ear are $eri#ied b& co"nt or

con#iration.

The co"nt o# sec"rities on entit&5s !reises sho"ld be cond"cted at the

sae tie as the co"nt o# cash.

Sec"rities held in ban) sa#et& de!osit boxes a& be co"nted be#ore or a#ter

the &ear ' end, (ith reliance !laced on ban) records to ass"re there (as no

entit& access bet(een the date o# the co"nt and &ear ' end.

The co"nt sho"ld con#ir all details o# sec"rit& certi#icates to ens"re that

there is no "nrecorded s"bstit"tion.

In$estent incoe can be $eri#ied b& recalc"lation #or interest and, #or

di$idends, b& re#errin* to the a"dited #inancial stateents o# in$estees.

Mar)et $al"es are $eri#ied b& re#errin* o# o##icial stoc) exchan*e

3"otations.

The a"ditors o# the !arent entit& are res!onsible #or re!ortin* on the

consolidated #inancial stateents and "st obtain e$idence relatin* to

rele$ant balances o# other *ro"! entities.

The #irst re3"ireent is to identi#& *ro"! entities and their classi#ication as

s"bsidiaries, associates and 6oint $ent"res.



8here *ro"! entities are a"dited b& other #irs, the !arent entit&5s a"ditors

"st !er#or !roced"res to deterine the reliabilit& o# those #inancial

stateents #or the !"r!ose o# incl"din* the in the consolidated #inancial

stateents.

Consolidation ad6"stents need to be $eri#ied, incl"din*0 #air $al"e

ad6"stents o# ac3"isitions and the deterination o# *ood(ill% eliination

o# inter ' entit& balances and transactions% standardi+ation o# acco"ntin*

!olicies% translation o# #orei*n c"rrenc& balances.

E49TING 9N AUDITED :INACIA; STATEMENTS

The disclos"re and the !resentation re3"ireents o# #inancial stateents are

deterined b& :inancial e!ortin* Standards and stat"tor& and other

re3"ireents.

:inancial e!ortin* Standards "st be consistentl& a!!lied in the !re!aration

and !resentation o# #inancial stateents.

The a"ditors sho"ld ex!ress a clear (ritten o!inion on the #inancial stateents.

The inde!endent a"ditors5 re!ort has a standardi+ed #orat.

The a"ditors5 re!ort a& be 3"ali#ied.

Materialit& is an i!ortant consideration in arri$in* at an a!!ro!riate o!inion. A

corollar& to conce!t o# aterialit& is !er$asi$eness. This relates to the n"ber o#

#inancial stateent ites a##ected b& a circ"stance.

In decidin* on the a!!ro!riate o!inion, the a"ditors consider i# there is a

disa*reeent (ith ana*eent and s"##icient a!!ro!riate a"dit e$idence to #or

an o!inion.



8hen a 3"ali#ied a"dit o!inion is ex!ressed, the o!inion section o# the a"ditors5

re!ort is odi#ied (ith the incl"sion o# a headin* s"ari+in* the 3"ali#ication

(hich is described in the o!inion section i# it is a disa*reeent and (ithin the

basis o# o!inion section i# it is a sco!e liitation.

Disa*reeents (ith ana*eent co"ld relate to the selection o# and < or the

ethod o# a!!lication o# acco"ntin* !olicies, the ade3"ac& o# disclos"re and

co!liance (ith rele$ant stat"tor& and other re3"ireents.

The a"dit andate a& i!ose sco!e liitations. I#, in the a"ditors5 6"d*ent,

the o"tcoe o# s"ch liitations is necessaril& a disclaier o# o!inion, the a"dit

en*a*eent sho"ld be declined.

Inherent "ncertainties are not ca!able o# reasonable estiation. 8here these are

#"ndaental the "ncertaint& "st be re#erred to in the basis #or o!inion section o#

the a"ditors5 re!ort.

An inconsistenc& ca"ses the reader to do"bt the reliabilit& o# in#oration in the

#inancial stateents. A isstateent o# #act ca"ses har to readers.

S"bse3"ent e$ents re3"irin* iss"e o# re$ised #inancial stateents sho"ld be

re#erred to in the reiss"ed a"ditors5 re!ort.

The !rinci!al e##ects o# International A"ditin* Standards on the a"ditors5 re!ort

are0 "se o# e!hasis o# atter #or re#errin* to "ncertainties and other

odi#ications to the a"ditors5 re!ort that do not constit"te a 3"ali#ication%

re#erence to a"ditors5 re!orts as bein* odi#ied or "nodi#ied (here odi#ied

incl"des incl"sion o# an e!hasis o# atter. The a"ditor has the res!onsibilit& to obtain s"##icient a!!ro!riate e$idence to

ens"re co!arati$es are not isstated.



:or o!enin* balances in initial en*a*eents, an "n3"ali#ied o!inion is ex!ressed

i#0 there is !ro!riet& o# o!enin* balances% there are no isstateents in o!enin*

balances% acco"ntin* !olicies are consistentl& a!!lied.

S!ecial conditions a!!l& (here #inancial stateents are !"blished electronicall&

and #or re!orts on s"ar& #inancial stateents, interi re!orts and !reliinar&

anno"nceents.

audit_cash and investments audit.doc

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