Audit Report: Cash Receipts, Deposits, and Revenue Reconciliation

This audit report examines the cash receipt operations of a company, revealing significant weaknesses in internal controls. The audit's purpose was to assess cash handling procedures, focusing on receipts, deposits, and reconciliation processes. The scope included reviewing records from 2016, scrutinizing management's plans, and evaluating internal controls. Key findings highlight that the office manager has sole responsibility for all cash-related tasks, monthly deposits, and delayed reconciliations, leading to potential risks of fraud or errors. The audit identified a cash shortage of $1,000. Recommendations include segregating duties, providing proper training, implementing detailed documentation, and conducting more frequent reconciliations to mitigate these risks. The report emphasizes the need for improved cash management practices to ensure financial accuracy and prevent potential losses.

Running head: AUDIT
Audit
Name of the student
Name of the university
Author note

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Table of Contents
Background information............................................................................................................2
Purpose of the audit....................................................................................................................2
Scope of the audit.......................................................................................................................2
Statement of condition...............................................................................................................3
Conclusion and recommendation...............................................................................................3
References..................................................................................................................................5

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Background information
The athletic department manages their deposits to business office and then reconcile
all the revenues from the sales of the tickets and all these activities are managed by the office
manager only. The company make their deposits on monthly basis and generally it includes
more than $ 2,000 under checks and the receipts related to credit cards.
Purpose of the audit
Generally, the check and cash receipts are most of the time subject to the
misappropriation if proper control is not followed. Further, as the checks include the bank
information and name best practice must be maintained for the purpose of reconciliation. The
cash audit will be carried out to ensure that the cash has been properly named and categorized
at the time of preparing the financial statement1. Further, it will assure that the cash balances
and the cash deposits are reconciled properly with regard to the dates that are reported under
the financial statement. The audit will further assist in verifying and obtaining mathematical
accuracy of the cash related transactions through tracing the opening as well as the closing
balances. Moreover, the audit will assist in recognizing the errors related to deposits,
withdrawals, overstatement or understatement of cash2. To assure that the records reveal the
expenses and receipts of cash mentioned in the balance sheet, the auditor shall analyse the
cash disbursement and receipts for the specific period prior to the financial statement.
1 Agostino, Frank, Jairo G. Cano, and Matthew Turtoro. "How to Report Cash Receipts and Payments." J. Tax
Prac. & Proc. 16 (2014): 21.
2 LaShaw, Margie Ness, Tara Lambert, and David Sloan. "Implementing Faith in Accounting: Application in a
Student Auditing Project Through Service to the University." Christian Business Academy Review 11.1 (2016).

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Scope of the audit
The scope of cash receipt audit was to identify the receipt of cash operation procedure
and the associated records of the organization. The audit will be carried out as per the
Auditing standards issued by the Comptroller general and government of the country and will
include various tests related to the records and will include such other procedures of auditing
as the auditor will feel necessary under the circumstances3. To fulfil the requirement of audit,
the auditors will examine the cash related records of the department and the activities during
the year of 2016. Full detail of management’s plan, procedures and policies will be obtained
by the auditor. Moreover, the auditor will scrutinize the internal control procedure with
regard to the operations related to receipt of cash and recording of the revenues. As the office
manage is solely answerable for all the cash related deposits and revenue from the sales of
receipts, he will be asked to provide all the required details of audit4. Further, the branch
offices will be visited to confirm the daily collection, deposits, handling and recording of
cash related transactions.
Statement of condition
Various loopholes were recognized regarding the cash receipts, deposits and
reconciliation of the revenues. It was found that the office manager alone is solely
responsible for the preparation of transmittals of deposits to business office and reconciliation
3 Henderson, Jason Dean. "Financial Statement (2015)." Proceedings of the Oklahoma Academy of Science.
Vol. 95. 2016.
4 Solieri, Steven A., and Joan Hodowanitz. "Electronic Audit Confirmations: Leveraging Technology to Reduce
the Risk of Fraud." Journal of Forensic & Investigative Accounting 8.1 (2016).

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of revenue received for sale of event tickets5. Further, the deposits are made on monthly basis
and generally include receipt from credit card and more than $ 2000 in checks. Another issue
was that the events are generally reconciled in two months period which is considered as
quite a long time for the purpose of reconciliation. Finally, the major issue found was that the
received monies are kept in the office manager’s desk keeping it in the manila envelopes till
it is deposited in the bank. Moreover, during audit the auditor found shortage of cash
amounted to $ 1,000.
Conclusion and recommendation
From the above discussion it is concluded that various issues are there with the
company with regard to receipt, deposits and reconciliation of cash and revenue that may lead
to fraud, misstatement or embezzlement of cash. Looking into the circumstances, the
following measures are recommended –
 Segregation of duties – as the office manager is solely responsible for al the cash
related transactions, there is a high chance of misstatement, whether intentionally or
unintentionally. Separating the duties among 3 -4 employees will make it difficult to
conceal the fraudulent transactions.
 Access – all the employees responsible for the cash transactions shall be provided
with proper training before handling the cash. The process shall be documented in
writing and must be handed over to the employees before assigning the job.
5 Nazri, M. F., et al. "Misconducts in Record Keeping for Cash Businesses: Malaysian Evidence on Game-
Playing Issues on Audit Estimates between Tax Representatives and the Tax Office." 2nd International
Congress on Interdisciplinary Behavior and Social Science, ICIBSoS 2013. Taylor and Francis-Balkema, 2014.

5AUDIT
 Documentation – when the payment will be received, the responsible person shall
record it immediately in the cash receipt register along with the details like date,
amount and payer. The transaction number shall be unique and shall be matched at
the time of reconciliation
 Reconciliation – the reconciliation process shall be carried out at least twice in a
month instead of delaying it for two months as with times the discrepancies may
disappear and make it difficult to identify.

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References
Agostino, Frank, Jairo G. Cano, and Matthew Turtoro. "How to Report Cash Receipts and
Payments." J. Tax Prac. & Proc. 16 (2014): 21.
Henderson, Jason Dean. "Financial Statement (2015)." Proceedings of the Oklahoma
Academy of Science. Vol. 95. 2016.
LaShaw, Margie Ness, Tara Lambert, and David Sloan. "Implementing Faith in Accounting:
Application in a Student Auditing Project Through Service to the University." Christian
Business Academy Review 11.1 (2016).
Nazri, M. F., et al. "Misconducts in Record Keeping for Cash Businesses: Malaysian
Evidence on Game-Playing Issues on Audit Estimates between Tax Representatives and the
Tax Office." 2nd International Congress on Interdisciplinary Behavior and Social Science,
ICIBSoS 2013. Taylor and Francis-Balkema, 2014.
Solieri, Steven A., and Joan Hodowanitz. "Electronic Audit Confirmations: Leveraging
Technology to Reduce the Risk of Fraud." Journal of Forensic & Investigative
Accounting 8.1 (2016).