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CA Intermediate · Auditing and Ethics · Audit of Banks

An auditor is auditing a bank branch and wants to verify cash balance on the last day of the financial year. The branch has a strong room, cash in ATMs and cash with tellers. Which procedure is most appropriate?

The auditor should physically count cash in the strong room and tellers' tills and verify ATM cash through replenishment records, with branch officials present, at or near the year-end. A management certificate or prior-year figures alone are not sufficient audit evidence of existence.

  1. ARely only on the cash balance reported in the previous year's closing statement
  2. BCount cash in the strong room and tellers' tills, and check ATM cash through the replenishment records, ideally under the custody of branch officials at the close of business or as near that date as possibleCorrect
  3. CAccept the branch manager's written certificate of cash balance without any counting
  4. DCount only the tellers' cash, as the strong room cash is covered by insurance

Explanation

Physical verification of cash on hand, preferably simultaneously across all custody points and with branch officials present, is the standard procedure. ATM cash is checked with replenishment and reconciliation records. A manager's certificate alone is not sufficient evidence, and insurance does not remove the need to verify existence.

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