Explain the methods of verification of cash in hand and cash at bank.

Cash at Bank:

First of all, the auditor should compare the balances as shown in the pass book with the balance of cash as shown in the bank column of the cashbook. If there is some difference, the auditor should prepare a Bank Reconciliation Statement. It is possible that fictitious pass book may be presented to the auditor without bringing the fact to his knowledge. In such a suspicious situation he should obtain a certificate directly from the bank. In case of some difficulty he can check the accounts himself in the bank ledger.

He should obtain separate certificates for Fixed Deposit Account, current account, savings bank account etc., from the bank. This is the only valid way of verifying the balance in the different accounts. Interest charged and allowed by the bank should be examined carefully. Commission charged by the bank should also be examined with proper care.

Cash in Hand:

The object of verification of cash in hand is to establish accuracy and validity of cash balances as shown in the cash book. The auditor should carry out the cash verification at the year end or by way of surprise check any time during the year. Preferably cash should be physically counted and tallied with the Cash Book balance.

Cash balance with the head cashier, petty cashier and the office balance should be verified by the auditor in one sitting and not in intervals. If the business enterprise under audit is large in size , where the counting of the cash balance is not possible, then the auditor should follow test checking method that is, he should select some bundles of currency notes on random basis and count them.

Similarly, he should count the different denominations of coins. Inspect if the cash in hand includes cheques, drafts or some temporary advances to staff, they should be separated under authority and properly recorded in the books of account. Get certificates from the branch auditors where he finds it difficult to verify cash in hand at the branches of the company.

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