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CMA Intermediate · Corporate Accounting and Auditing · Auditing of Different Types of Undertakings

While auditing a charitable trust that receives donations in cash at its temple counters, which procedure gives the auditor the best assurance that all cash donations received have been recorded?

The best assurance comes from verifying that donation boxes are opened before responsible persons, counted, recorded and promptly banked. Cash donations have no external documents, so the control over collection is the key evidence of completeness. Bank statements alone cannot reveal unrecorded or unbanked cash.

  1. AVerifying that the donation box is opened in the presence of responsible persons and the collections are counted, recorded and deposited promptlyCorrect
  2. BChecking only the bank statement for deposits at year end
  3. CConfirming the trust deed has been registered
  4. DComparing donation income with the previous year's donation income

Explanation

Cash donations carry a completeness risk because no external document exists for them. Control over opening the box, counting in the presence of responsible persons, recording and prompt banking gives the strongest assurance. Checking bank deposits alone cannot show cash that was never banked or recorded.

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