Learn something new every day
More Info... by email
A cash audit is a type of accounting audit that focuses on cash transactions conducted between an identified start date and end date. An audit of this type may be considered full or partial, depending on whether only certain transactions are evaluated or if every cash transaction relevant to the audit period is scrutinized. The purpose of a cash audit is to ensure that all investigated transactions have been conducted in compliance with generally accepted accounting procedures, and that the transactions were 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 that are received and how they are recorded in the accounting records. Along with addressing cash receipts, the audit will also look closely at any type of disbursements made as cash transactions, making sure those disbursements are properly documented and were done with proper authorization. As a final aspect of the task, the cash audit will also make sure that the receipts and disbursements involved line up so that the amount of cash that is shown as being on hand or on deposit is justified by the combination of cash transactions.
The scope of a cash audit may focus on specific types of cash transactions, or involve an overall assessment of transactions conducted within a given period of time. For example, a petty cash audit would not be concerned with any cash transactions other than those involving the contributions to and the disbursements from the petty cash account. At other times, a full audit may be called for as a way of preparing the books for closing out at the end of a calendar or business year, or even in preparation of preparing annual tax returns. In the event that there is some suspicion of mishandling of company funds or assets, there is a good chance that a board of directors or others would call for a full audit of the accounting books rather than settling for a partial audit of only selected types of transactions.
While a business is likely to conduct a cash audit at least once a year, the process can actually be implemented at any time. All that is required is to identify a start date and end date for the transactions that will be evaluated and the type of cash transactions involved. An audit of this type may be easily conducted for a calendar month, a single quarter of a year, or even as a semi-annual audit that makes it possible to identify and reconcile any issues earlier in the business year, rather than attempting to do so at the end of a longer period. Although the idea of a cash audit sometimes conjures up the idea that someone has intentionally mishandled the cash assets of the company, an audit will also identify simple errors in posting that sometimes occur, making it possible to correct the postings and keep the company accounting records accurate and up to date.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!