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CA Intermediate · Auditing and Ethics · Audit of Banks

In the audit of Malabar Bank's cash balances at branches, CA Farah wants the most reliable evidence of cash in hand as at the balance sheet date at a large branch. Which procedure is the most appropriate?

The best procedure is physical verification of cash by the auditor, counted simultaneously under proper control and reconciled to the books, including ATM cash where relevant. Management representations or book totals alone are weaker evidence and do not directly establish the balance on the reporting date.

  1. ARely on the branch manager's written confirmation alone
  2. BVerify cash physically by counting it, simultaneously and under proper control, and reconcile with the books, including cash with ATMs where relevantCorrect
  3. CExamine only the cash book totals of the last month
  4. DCheck only the next day's opening balance

Explanation

Physical verification of cash by the auditor, done simultaneously with control over the cash and reconciled to the books, gives the strongest direct evidence. Management confirmations and book totals are weaker, and next-day balance alone does not establish the balance on the reporting date.

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