Core Text

Module 1:
Plan the Cash Examination

Module Description
In planning the cash examination, the auditor has to have a good understanding of the
cash management in the agency. It is therefore necessary that the auditor has to be
familiar with how the agencys collection and disbursement systems work. Likewise,
the auditor should also know who the accountable officers of the agency are.
In this module, Chapter I of the Revised Cash Examination Manual (RCEM) is included
and will serve as your core text. This chapter gives the legal bases, scope and
objectives of cash examination. On the other hand, Chapter II discusses laws and rules
relevant in the conduct of cash examination. These two chapters of the RCEM are
helpful in your understanding of Module 1.
In addition, you will read the definition of the terms accountable officer, and cash
examination.

Learning objectives
By the end of the Module, you will be able to

Explain the terms accountable officer and cash examination;

Distinguish the terms responsibility, accountability and liability;
Enumerate the process flow pertaining to collections; and
Prepare an audit program for cash examination of a disbursing officer.

Definitions
Accountable officer - The Glossary of Terms for Auditors defines accountable officer
as "the person who by reason of his office or duty ought to be or deemed to be in
possession or custody of government funds or property." Thus there are accountable
officers for government funds such as treasurers, cashiers, disbursing officers,
collecting officers, tellers and accountable officers for government property such as
the property officer or the supply officer. (Reference: Handbook on Cash
Examination).

Examination Plan and Program

Planning is a basic management process in anticipating and preparing to meet
conditions that may affect the audit process. For cash examination, the process
includes the following:
Development of an overall plan for the cash examination taking into consideration
the objectives to be accomplished, the scope and the manpower requirements.
Preparation of an audit program to estimate the man-hours needed to conduct the
cash examination and schedule it properly to avoid inconvenience to the agencys
clientele and cash accountable officers. (Reference: Handbook on Cash
Examination).
Audit Program
An Audit Program contains a set of detailed techniques and procedures for the
attainment of specific audit objectives.
Elements of an Audit Program
Risk Statement - A risk statement provides the clarity and descriptive
information required for a reasoned and defensible assessment of the risk's
occurrence probability and areas of impact. (Reference: Risk Management
Toolkit).
Audit Objective - Audit Objectives are broad statements developed by auditors
and define intended audit accomplishments. (Reference: Practice Guide for
Planning Individual Performance Audits).
Assertions Audit assertions are the implicit or explicit claims and
representations made by the management responsible for the preparation of
financial statements regarding the appropriateness of the various elements of
financial statements and disclosures. (Reference: Accounting-Simplified.com).
Examples of these assertions, taken from Accounting Tools, are:
o Existence - The assertion is that all account balances exist for assets,
liabilities, and equity.

o Accuracy - The assertion is that all information disclosed is in the correct

amounts, and which reflect their proper values.
o Completeness - The assertion is that all reported asset, liability, and
equity balances have been fully reported and that all transactions have
been recorded.
Audit Procedures are the auditors techniques in gathering auditing
evidence to substantiate the reliability of the accounting records. The auditor
evaluates whether the information presented is logical and reasonable.
Examples of auditing procedures are observing assets to verify existence and
amount (e.g., fixed assets), collecting independent confirmations from
external parties (e.g., bank confirmation), evaluating internal control,
appraising
managements
activities,
and
obtaining
management
representations. The audit procedures to be followed on an engagement are
indicated in the audit program. (Reference: allBusiness).
Man-days indicates how much manhours are spent to perform a particular
audit procedure.
Person Responsible is the member of the team who is responsible for doing or
carrying out the cash examination procedures and all other activities pertaining
to the conduct of the cash examination.
A sample of the format of an audit program is given in one of the exercises for this
module.

Summary
The module emphasized that the authority to conduct regular cash examination shall
be inherent to the audit team having jurisdiction over the audited agency. The
Commission on Audit issue office orders as the authority to conduct cash examination
in special cases.
The module likewise defined what cash examination is and what an accountable
officer is. It also discussed the concepts of responsibility, accountability and liability
which are important concepts in cash examination. The different laws and regulations
on cash examination were also explained in Chapter II of the RCEM. The pertinent
guidelines on cash examination were discussed in Chapter III of the RCEM.
The basic elements or components of an audit program were explained to help the
auditors to prepare it when required.

References:
1. Chapters I and II of the Revised Cash Examination Manual
2. Handbook on Cash Examination