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A cash audit examines cash transactions during a specific period to ensure they comply with accounting procedures and company policies. It can focus on specific transactions or be a full audit. The audit examines cash receipts, disbursements, and ensures they match up. It can identify accounting errors and is conducted at least once a year.
A cash audit is a type of accounting audit that focuses on cash transactions made between an identified start date and an identified end date. Such an audit may be considered full or partial, depending on whether only certain transactions are assessed or whether every cash transaction relevant to the audit period is analysed. The purpose of a cash audit is to ensure that all transactions investigated have been carried out in accordance with generally accepted accounting procedures, and that the transactions are in accordance with the policies and procedures of the company involved.
In general, a cash audit is structured to accomplish two purposes. The first focuses on the type of cash deposits or contributions received and how they are recorded in the accounting records. In addition to addressing cash receipts, the audit will also closely examine any type of disbursements made as cash transactions, ensuring that those disbursements are properly documented and made with proper authorization. As a final aspect of the task, the cash audit will also ensure that the receipts and disbursements involved line up so that the amount of cash shown as available or on deposit is accounted for by the mix of cash transactions.
The scope of a cash audit may focus on specific types of cash transactions, or involve a general assessment of transactions made within a given period of time. For example, a petty cash audit would not address any cash transactions other than those involving contributions and disbursements from the petty cash account. At other times, a full audit may be requested as a way to prepare the books for closing at the end of a calendar or business year, or even in preparation for the preparation of annual tax returns. In the event there is any suspicion of mishandling of company funds or assets, there is a good chance that a board of directors or others will request a full audit of the accounting books rather than settle for a partial audit of just selected types of minutes.
While a company will likely perform a cash audit at least once a year, the process can be implemented at any time. All that is required is to identify a start date and end date for the transactions to be evaluated and the type of cash transactions involved. Such an audit can easily be conducted over a calendar month, a single quarter of a year, or even as a semi-annual audit allowing any issues to be identified and reconciled earlier in the business year, rather than trying to do so at the end of a longer period. Although the idea of a cash audit sometimes evokes the idea that someone has intentionally misused the company’s cash assets, an audit will also identify simple accounting errors that sometimes occur, making it possible to correct accounting and record keeping. company accounting accurate and up-to-date.
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