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CA Intermediate · Auditing and Ethics · Audit of Banks

While performing year-end audit procedures at a bank branch, the auditor observes large cash balances. Which procedure is the most appropriate for verifying cash in hand at the branch on the balance sheet date?

The auditor should physically count the cash at the branch and agree it with the cash book and general ledger, doing so on the balance sheet date or on another date with reconciliation. A manager's certificate or prior-year comparison is not sufficient evidence for cash on hand.

  1. ARely on the branch manager's certificate alone
  2. BCount cash and verify it with the cash book and the general ledger balance, preferably on the balance sheet date or an adjusted date with reconciliationCorrect
  3. CCompare cash only with the previous year's balance
  4. DConfirm cash by writing to the Reserve Bank of India

Explanation

Cash should be physically verified and agreed with the books, ideally at the year end or on a nearby date with reconciliation to the balance sheet date. A manager's certificate is not sufficient evidence and comparison with last year is only analytical. RBI confirmation applies to RBI balances, not branch cash.

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