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Substantive test for cash balances

You are the in-charge accountant examining the financial statements of the Gutzler Company for the year ended December 31, 20X0. During late October 20X0, you with the help of Gutzler's controller, completed an internal control questionnaire and prepared the appropriate memoranda describing Gutzler's accounting procedures. Your comments relative to cash receipts are as follows:

All cash receipts are send directly to the accounts receivable clerk with no processing by the mail department. The accounts receivable clerk keeps the cash receipts journal, prepares the bank deposit slip in duplicate, posts from the deposit slip to the subsidiary accounts receivable ledger, and mails the deposit to the bank.

The controller receives the validated deposit slips directly (unopened) from the bank. He also receives the monthly bank statement directly (unopened) from the bank and promptly reconciles it.
At the end of each month, the accounts receivable clerk notifies the general ledger clerk by journal voucher of the monthly totals of the cash receipts journal for posting to the general ledger.

Each month, with regard to the general ledger cash account, the general ledger clerk makes an entry to record the total debits to cash from the cash receipts journal. In addition, the general ledger clerk on occasion makes debit entries in the general ledger cash account from sources other than the cash receipts journal (e.g., funds borrowed from the bank).
In the audit of cash receipts you have already performed certain of the standard auditing procedures listed below. The extent to which these procedures were performed is not relevant to the question.

1. Total and cross-total all columns in the cash receipts journal.
2. Trace postings from the cash receipts journal to the general ledger.
3. Examine remittance advices and related correspondence to support entries in the cash receipts journal.


Considering Gutzler's internal control over cash receipts and standard auditing procedures already performed, list all other auditing procedures and reasons therefore which should be performed to obtain sufficient audit evidence regarding cash receipts. Do not discuss the procedures for cash disbursements and cash balances. Also do not discuss the extent to which any of the procedures are to be performed. Assume adequate controls exists to assure that all sales transactions are recorded. Organize your answer sheet as follows:

Other audit procedures. Reasons for other audit procedures.

Solution Summary

This posting provides a detailed, 10-point, answer organised as "Other audit procedures" & "Reasons for other audit procedures" to meet the requirements of the question.