Acca aa s21 Notes

1. Bank balance
The amount of cash at bank and/or bank overdraft is one of the most straightforward balances in the 
statement of financial position to audit. Almost certainly the auditor will write it to the client’s bank to 
obtain a 'bank report for audit purposes' ('bank certificate'). The bank certificate will certify the 
amounts in the various accounts of the client and it should also tell the auditor about any security 
which the bank has for overdrafts and for loans, together with details of any assets which the bank is 
holding on behalf of the client, such as share certificates. It should also show any accrued interest or 
bank charges.
The auditor will make sure that the amount in the client’s cash book agrees with the amount on the 
statement of financial position and will perform or reperform a bank reconciliation as evidence that 
that amount of cash is correct. In reperforming a bank reconciliation the auditor will:
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Agree the balance per the bank statement to the bank certificate.
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Agree uncleared ('outstanding') deposits and unpresented cheques to the next month's bank 
statement to confirm that they have 'cleared' the banking system.
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Confirm that the balance per the bank statement as adjusted for reconciling items (essentially 
timing differences) agrees to the client's cash book, general ledger balance and statement of 
financial position.
2. Cash in hand
If the client has a material amount of physical cash, for example if the client runs a chain of shops each 
with a cash float, then at least some cash counts will be carried out to confirm the existence and 
accuracy of the cash balance at the reporting date.
Even if balances are not material, the auditor may routinely count cash because of the relatively high 
risk of theft. Where petty cash/a float is controlled using an imprest system (i.e. cash + authorised 
vouchers = imprest balance), the auditor may carry out tests of controls on the authorisation of 
vouchers and replenishment of the float during an interim audit.