You are the in-charge auditor examining the financial statements of the Gutzler Company for the year ended December 31. During late October, with the help of Gutzler’s controller, you completed an internal control questionnaire and prepared the appropriate memoranda describing Gutzler’s accounting procedures. Your comments relative to cash receipts are as follows:
• All cash receipts are sent directly to the accounts receivable clerk with no processing by the mail department. The accounts receivable clerk keeps the cash receipts journal, prepares the bank deposit slip in duplicate, posts from the deposit slip to the subsidiary accounts receivable ledger, and mails the deposit to the bank.
• The controller receives the validated deposit slips directly (unopened) from the bank.
She also receives the monthly bank statement directly (unopened) from the bank and promptly reconciles it.
• At the end of each month, the accounts receivable clerk notifies the general ledger clerk by journal voucher of the monthly totals of the cash receipts journal for posting to the general ledger.
• With regard to the general ledger cash account, the general ledger clerk makes an entry each month to record the total debits to cash from the cash receipts journal. In addition, the general ledger clerk, on occasion, makes debit entries in the general ledger cash account from sources other than the cash receipts journal, for example, funds borrowed from the bank. In the audit of cash receipts, you have already performed certain standard audit procedures:
• All columns in the cash receipts journal have been totaled and cross-totaled.
• Postings from the cash receipts journal have been traced to the general ledger.
• Remittance advices and related correspondence have been traced to entries in the cash receipts journal.
Required:
Considering Gutzler’s internal control over cash receipts and the standard audit procedures already performed, list all other audit procedures that should be performed to obtain sufficient appropriate audit evidence regarding controls over cash and give the reasons for each procedure. Do not discuss the procedures for cash disbursements and cash balances.
Also, do not discuss the extent to which any of the procedures are to be performed. Assume that adequate controls exist to ensure that all sales transactions are recorded. Organize your answer sheet as follows:
Other Audit Procedure
Reason for Other Audit Procedures.