LEVEL

AUDIT OBJECTIVES PROCEDURES

OF RISK
A.       FINANCIALS and OPERATIONS
   
1) CASH Cash Count
1. Conduct cash audit at least twice a month in different intervals using a
This account represents cash count sheet provided.
total cash held by the bank 2. At the start of the audit, ascertain the location of the teller’s cash
consisting of both notes and funds, the reserve cash and any other cash funds and maintain control
coins in Philippine currency. over them and plan the cash count.
Foreign currency held by 3. Check all cash receipts and cash disbursements with the approval of
the bank and petty cash the approving officer to establish his/her accountability before cash
fund maintained for petty count and list all cash items held by the teller as part of his/her funds.
cash expenses are included Take note that if the teller or cashier has already transacted with
in this account but should depositors before the cash count, make sure that all deposits and HIGH
be reported under “Other withdrawals before the cash count are properly accounted for. RISK
Assets”. Likewise, cash- 4. Count cash on hand as follows:
held-in-trust is treated as a a. On teller’s fund, count all loose bills, mutilated bills and new bills.
contingent account. b. All bills and loose coins in the custody of the teller should be
counted then in detailed and should be counted piece by piece.
Audit Objectives: Wrapped bills sealed by the depository bank still intact should
1. To ascertain that the not be opened but should be test-counted.
cash at the beginning c. Count all coins; sealed coins do not have to be opened but
and end of the audit should be bulk counted for proof then a detailed counted on a
period was in fact on test basis.
hand and available and d. Cash compartments should be inspected to see to it that all
that it is in agreement items that should be included are counted. Items, other than
with the general ledger cash, found in such compartments should be listed, noting all
or books; information necessary for subsequent follow up, in the reverse
2. To investigate other side of the count sheet. This may include customer’s savings
possible sources of passbooks or unprocessed deposit tickets/slips, deposit notes,
cash and verify whether loan payment and personal property of the accountable officer.
controls are in e. Count cash in vault and its entirety.
existence to prevent its 5. Where the results of the first cash count show shortages, unauthorized
misappropriation before advances or other items of doubtful in nature or if there is any reason
and after it has been to believe that the verification has not been completely effective such
recorded in the books; as that the count was delayed affording an opportunity for substitution
3. To determine or temporary restitution of a shortage, take another surprise count
ownership and proper prior to the completion of the examination.
accountabilities; The following points should always be kept in mind in connection with
4. To ascertain that all cash counts:
expenditures are a. Before proceeding with the actual count, the auditor should be
justified and are sure that he/she is thoroughly familiarly with the branch
supported by properly routine for the cash handling of cash and what funds are to be
approved evidence; counted or verified.
5. To determine that the b. The auditor should be on guard against possible substitution
internal control system of funds by collusion or otherwise. All cash and other funds,
for cash is so whether operating funds or unprocessed deposit for loan
established that no one payments through checks or in cash should be controlled and
person is in a position verified simultaneously.
to influence directly or c. Cash should always be counted in the continuous presence of
indirectly all records the teller or his/her representative. The teller should be
relating to the receipt or required to sign the count sheet to signify his/her conformity to
disbursement of funds. the amount of the counted.
6. To determine accuracy d. The cash count sheet should be accomplished in ink as this
and proper will reserve as a permanent record. Corrections or changes in
classification of the the count sheet should be initialed by both the auditor and the
account in latest BSP custodian of the fund being counted.
required reports. e. Results of the count should be communicated to the branch
manager and to the management to put in writing the cash
count report.
f. In conducting the cash count, as in any other phase of the
 LEVEL
AUDIT OBJECTIVES PROCEDURES
OF RISK
audit examination, the auditors should always exercise tact
and diplomacy to maintain a harmonious relationship with the
employees in the branch audited.
6. Reconcile amounts counted with individual accountabilities of cashiers
and tellers as shown in their respective proof sheets. Any
discrepancies should be recognized and recorded accordingly.
7. In the event of a major difference, the accountable officer should be
asked to verify. If such difference actually exists, both of them should
sign the receipt for the actual amount of cash counted. The auditor
performing the cash count must not leave or release the cash until this
procedure has been completed.
8. Obtain explanation and fully substantiate explanations for material
shortages or overages from accountable officers.
9. Examine cash records for a test period by performing the following
procedures:
a. Examine cash proof sheets and other cash records.
b. Trace totals of proof sheets to general ledger.
c. Test trace to the individual subsidiary ledgers deposit or
withdrawal slips.
d. Trace cash deposits to clearing banks appearing on proof
sheets before the end of each month.
e. Trace cash withdrawals from clearing banks appearing on
proof sheets after the end of each month.
f. Letter (d) and (e) are for the purpose of determining the
presence of kiting.
10. If necessary, request or prepare bank reconciliation statements having
the same cut-off with the cash count to assure that there is no
kitting/lapping of bogus deposits and/or withdrawals.
11. With regards to check disbursements, examine each cash voucher by
referring to supporting documents and giving attention to approvals as
to payment for utility bills, electricity, telephone bills and other ordinary
operating expenses. Following are to be observed:
a. See to it that payments made are bona fide disbursements
and are properly authorized. The original invoice should
normally accompany the disbursement voucher. Investigate
any duplicate invoices used as supporting documents.
b. Investigate any alterations in the supporting documents,
especially as to amounts.
c. Take note that all papers supporting the disbursements are
stamped “PAID” and marked with the date of payment and
checked number.
d. Check the total amount of the disbursement against the
underlying cash voucher.
e. Account for the numerical sequence of checks issued and see
to it that voided checks are duly cancelled and preserved.
f. Review the cash disbursement logbook for the period not
covered by the tests and vouch large amounts and unusual
items to determine that they are properly accounted for.
12. Evaluate or observe system of internal control during cash count such
as:
a. Inquire to teller or cashier if there are written policies and
procedures for cash operations.
b. Observe if the area is orderly and has adequate security that
cash handling areas are secured from entry by unauthorized
persons.
c. Simultaneously with the cash count, control registers should
be updated during the cash audit. Take a physical inventory of
all unused accountable form. Make sure that no extraction has
been made from the unused forms. Among the accountable
forms are unused manager’s checks, cashier’s checks, official
receipts and other forms as determined by the auditor in
 LEVEL
AUDIT OBJECTIVES PROCEDURES
OF RISK
charge of the examination.
In connection with this work, perform the following procedures:
 Establish the accountability for forms and agree with
the count.
 Check on a test basis receipts and issues of forms by
reference to the register of accounting forms and
supporting documents.
 To ensure that all checks are properly accounted for
by inspecting the chequebook currently in use, pre-
numbered, being used in sequence and that
signatories do not pre-approve checks.
d. Review the control of spare teller keys and combinations.
Ascertain that they are maintained in sealed envelopes
bearing the current teller’s signature across the flap and that
these envelopes are under dual control. That the combination
of the safe is changed periodically and record when it was last
changed.
e. To determine if the funds are kept in a safe at the end of the
day and cash limits should be observed by the teller or
cashier.
f. A complete accounting of teller transactions for the day should
be rendered at the close of business for the day; cash
differences should be traced or located and or duly accounted
for.
13. Following are to include in preparing the cash count reports:
a. Complete cash count sheet form and have the teller or cashier
sign the cash count sheet verifying that all funds were
returned to him/her intact.
b. Include recommendations for enhancing the accountability,
security, segregation of duties and responsibilities and
documentation or reconciliation process.
c. Include any suggestions to improve effectiveness of
subsequent cash counts.
14. Subsequent cash audit should be done to ensure the accuracy of cash
and checks on financial statements. Perform the follow-up procedures
with respect to the cash count.
a. Ascertain that all checks at the time of the count are deposited
promptly and are honored by the bank.
b. Examine bank debit memos received in the following three
days after the cash count. Carefully investigate any check
subsequently returned by the bank.
15. Check accuracy and proper classification of the account in BSP
reports.
16. List exceptions.

Additional Procedures on
Reconciliation:
1. Evaluate system of internal control in loading, replenishment and
reconciliation of ATM. Observe if logbooks are properly accomplished
and maintained.
2. Obtain copy of the printed ATM counters (receipt showing cash
position), take note the time of cash count and determine the cut-off
to be reconciled.
3. Count the cash on the cassettes in the presence of the accountable
officer or authorized representative. Compare balance with the
counter.
4. Return cash counted to the accountable officer and obtain
acknowledgement for the receipt of items counted.
5. Obtain ATM daily activity report from the date of cut-off until the date
of cash count to determine the total withdrawals made on the ATM.
6. Compare amount of cash counted against the report. Should there be
 LEVEL
AUDIT OBJECTIVES PROCEDURES
OF RISK
any difference noted, verify the next day on the EJ files or on the daily
activity report.
7. Consider the possibilities of debit without dispense or irregularity if
still there is shortage or overage noted.
8. Verify substantial accuracy and proper classification of the account in
the latest financial statement.
9. List exceptions.
Note:
The presence of the teller or a representative is required during
the entire verification. Under no circumstances should an auditor
remain alone with cash. If teller’s proof is not completed, as in the
case of an afternoon count, do not start the count but observe teller
and cash until proof is made. Accompany teller if he/she leaves the
cage to run checks, etc.
Review teller and supervisor passwords. Ascertain that they are
maintained in sealed envelopes bearing the current teller and officer’s
signature across the flap and that these envelopes are under dual
control.

HIGH
2) CHECKS AND OTHER 1. Simultaneous with the cash count, control all checks and other cash RISK
CASH ITEMS items on hand.
This account includes: 2. Run-up checks and other cash items and compare total against
1. Checks drawn on general ledger balance, investigate any difference noted.
other banks received 3. Prepare or obtain a schedule.
either for deposit or in 4. Review checks and other cash items and take note of the existence of
payment of loans by the following:
bank’s depositors or a. Stale or post-dated checks and other cash items.
borrowers negotiated b. Disagreement between amount in figures and in words.
and presented by the c. Alterations and mutilations.
bank for d. Checks and other item to cover up shortages and other
clearing/payment irregularities such as:
through designated  Personal check drawn out for the amount of the cash
clearing banks. shortage.
2. Checks drawn on the  Checks drawn out on non-existing account.
bank but chargeable  False checks mixed with cash for the purpose of
against depositor’ balancing the account.
accounts held in the  Worthless items substituted for good checks to
bank’s other abstract the proceeds thereof.
branches.  Checks of officers and employees in material
Government checks amounts.
which are in the  Returned checks.
process of collection.  Checks drawn on the bank and held as cash items to
3. Such other items in avoid overdrafts.
process of collection  Cash items received as hold over to cover shortages
payable immediately in the regular items received.
upon presentation in  Checks drawn on one bank account for deposit to
the Philippines as are another bank account towards the end or at end of the
customarily collected month to cover shortages (kiting).
by banks as cash 5. After the review, return items to the custodian and obtain his signature
items. to acknowledge receipt thereof.
6. Ascertain that checks are cleared not later than following banking day
Audit Objectives: or within a reasonable period of time. Checks used to cover up
1. To establish the irregularities will usually de detected in the follow-up of their
propriety and validity of disposition.
the items as of the cut-
off date of audit.
2. To ascertain that cash
items examined as of Follow-up procedures for clearing items on hand as of audit cut-off
the audit cut-off date date:
are collected or i. Trace outward clearing items against check deposit slip to our
 LEVEL
AUDIT OBJECTIVES PROCEDURES
OF RISK
properly disposed of
during the course of the
audit.
3. To evaluate
effectiveness of internal
control; and
4. To determine
substantial accuracy
and proper
classification of the clearing bank. For items returned from clearing, ascertain
account in the latest reasons for such return and the subsequent disposition of
financial statement. these items. (Outward clearing items – checks drawn on other
banks received through for deposit/in payment of loans from
depositors/borrowers to be collected through the clearing
process).
ii. For Bank’s own checks (not yet posted to the current accounts
subsidiary ledger nor returned to clearing banks), trace (for
material items) subsequent debit to the individual current
accounts subsidiary ledgers and to the returned check register
as the case may be.
iii. Examine returned checks for four (4) days after count to
ascertain whether these include items counted by auditor and
investigate reason for return.
iv. Verify postings of returned checks to depositors’ ledger
(normally, these will consist mainly of returned checks of
savings depositors).
7. Follow through or trace all cash items on hand ascertain that they are
collected within a reasonable period of time. Investigate long
outstanding items.
8. Review the general ledger account to check whether checks are
deposited intact to the clearing bank in the following business day.
9. Evaluate system of internal control.