With a view to maintaining the profitability of one’s businesses and identifying mistakes or any fraudulent transactions, an objective audit of the cash receipts and the accounts receivables should be conducted regularly. First, the audit of cash and check totals involves comparison of the available deposits in the register against invoice totals to establish match or discrepancy, establishing whether there is a cash handling problem within the institution. During the same process, the auditor should examine deposit slips in to establish whether cash and check totals and compare against the sale’s figure; whereupon a mismatch would be inferred as lapping. Finally, at this stage, the audit would involve comparing the inventory orders to the sales figures to trace any unrecorded and or pocketed cash.
On the other hand, audit of accounts receivable involves examination of customer purchases made in credit against the invoices sent out to the purchasers. Further, the audit would also involve comparing invoices to checks and receipts by examining the check deposit records or by establishing contacts with the purchasers to confirm whether they had paid their respective invoices and issued with receipt for the same.
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Audit of cash and revenues and accounts receivables are therefore overlapping to the extent that both are objectively pursued to highlight any irregularities in transactions examined. First, regarding accounts receivables, it is still essential to reach out for total cash and check deposits in the other end to establish the total revenues, which ought to match the total sales figure. In the same vein, when auditing cash and check totals, the auditor may reach out for data on accounts receivable, to establish a comparison between the revenues and the sales as well.
To this extent it would suffice to infer that due to the nature of interdependency between the two forms of audits, the audits may therefore inherently bear inevitable instances of overlapping due to their interdependent nature. An auditor should therefore cautiously approach this area of audit, bearing sufficient comprehension of the interrelationships between the audits if efficacy of their output regarding the project is anything to go by.
References
Stice E. K. & Stice J. D. (2013). Intermediate Accounting. Cengage Learning.
Johnson K. (2017). How to Complete an Audit on Cash and Accounts Receivable. Retrieved from http://smallbusiness.chron.com/complete-audit-cash-accounts-receivable-34527.html
