Auditing bank and cash

In this lesson

1. 0:00 Banking and cash auditing overview
2. 0:13 Understanding bank balances and cash composition
3. 1:07 Sources of evidence for cash auditing
4. 2:29 Key audit risks in banking and cash
5. 3:02 Bank confirmation letter procedure
6. 4:41 Reviewing bank reconciliations step by step
7. 6:08 Additional cash audit procedures
8. 7:44 Most reliable evidence for bank balances

About this lesson

You'll discover the key audit risks (overstatement and window dressing), understand why bank confirmation letters provide the most reliable evidence, and master the practical procedures auditors use to verify cash balances, including bank reconciliations, cash counts, and post-year-end testing. This knowledge is essential for both your AA studies and real-world audit work, where banking and cash are often high-risk areas requiring careful control and verification. The lesson starts with a recap of how banking and cash appear in financial statements—distinguishing between cash in hand, petty cash, and cash on deposit across single or multiple bank accounts. You'll learn why auditors can't simply net off positive and overdrawn balances, and how bank reconciliations work as a key internal control. The video then walks you through the different sources of audit evidence available: client-generated items like cash books and cheque stubs versus third-party evidence like bank statements. The core audit procedures are explained step by step. You'll see why the bank confirmation letter is the gold standard for verifying existence and valuation of bank balances, how to request one (including obtaining client authority), and why timing differences mean you must also review and re-perform year-end bank reconciliations. Additional procedures covered include sampling reconciliations across the period, reviewing the cash book for unusual items, and counting physical cash balances—with practical guidance on when and how to do this, including the importance of simultaneous counts across multiple locations to prevent fraud.

Duration: 9m