Learn the essential steps and best practices for auditing cash in hand expenses to ensure accuracy and compliance in financial reporting.

How Auditor Should Audit CASH IN HAND Expenses

SURPRISE CHECKING

The auditor can test the cash book items without any notice. He can verify the receipts and payments through test checking.

. ASCERTAIN THE DAILY CASH NEEDS

The auditor can ascertain the daily cash needs. He can check it through the cash book.

• COUNTING

The auditor should count the cash and also compare it with the balance sheet.

PROPER A UTHORIZATION

The auditor should see that all cash transactions are properly authorized or not. Revenue nature of transactions are authorized by management and capital nature transactions by Board of Directors.

SAFETY MEASURES

The auditor should also examine the safety

*’ measures adopted by the business. The guards, lockers and other facilities must be satisfactory otherwise there is a risk of loss.

Steps to Audit Cash in Hand Expenses

1. Planning Phase: The first step in auditing cash in hand expenses is to develop a thorough audit plan. This plan should outline the objectives of the audit, the scope of work, and the audit procedures to be performed. It is essential to understand the client’s business operations and the nature of cash transactions before starting the audit.
2. Risk Assessment: Auditors must assess the risks associated with cash in hand expenses to determine the level of audit procedures required. Factors such as the volume of cash transactions, internal controls, and past audit findings should be considered during this phase.
3. Physical Verification: One of the critical steps in auditing cash in hand expenses is to physically verify the cash on hand. Auditors should count the cash, inspect cash registers and petty cash funds, and reconcile the physical count with the recorded amounts in the books of accounts.
4. Review Documentation: Auditors must review supporting documentation for cash in hand expenses, such as receipts, invoices, and payment vouchers. It is crucial to ensure that all expenditures are properly authorized, recorded accurately, and supported by valid documentation.
5. Testing Controls: Auditors should test the effectiveness of internal controls surrounding cash in hand expenses. This may include reviewing segregation of duties, cash handling procedures, and approval processes to identify any weaknesses or deficiencies.
6. Analytical Procedures: Analytical procedures can be used to detect anomalies or irregularities in cash in hand expenses. Auditors can compare current period expenses with prior periods, industry benchmarks, or budgeted amounts to identify any significant variations that may require further investigation.

Conclusion

Auditing cash in hand expenses requires attention to detail, thorough planning, and a comprehensive understanding of the client’s business operations. By following the steps outlined in this article, auditors can effectively audit cash in hand expenses and ensure the reliability and integrity of financial reporting.