Proof of cash;

              80 HASKINS & SELLS August
The Proof of Cash
E V I D E N C E is frequently encountered
that undue importance is attached to
the process commonly referred to as
"proving the cash." This process consists
of checking the totals of cash receipts and
disbursements as shown by the cash book
with the deposits and checks, respectively,
as shown by the bank statements—the lat­ter
reconciled in respect of checks out­standing
at the beginning and end of the
period.
The principle underlying this method is
sound when applied to a short period—the
shorter the better. It would be ideal, if
practicable, to prove that the receipts of
each day have been deposited, that each
deposit is represented on the books as cash
received, and that each item entered as a
disbursement is supported by a check
charged by the bank. However, it is not
sufficient to check the monthly totals of a
cash book in that manner, and it naturally
follows that checking the annual totals (or
the aggregate of monthly totals) does not
constitute verification of either the items
or the totals of the cash book.
It is absolutely essential in all cases to
foot both sides of the cash book, and to
compare the cancelled checks with the
entries of disbursements.
A cash collection which has been entered
as a receipt might be misappropriated by
failure to deposit it in the bank and by
underfooting the receipts side of the cash
book; then the total receipts as shown by
the cash book would agree with the total
deposits as shown by the bank. A fraud­ulent
disbursement might be concealed by
failure to enter it in the cash book, by
overfooting the disbursements side, and
by abstraction of the check when returned
by the bank; then the total disbursements
as shown by the cash book would equal the
total checks as shown by the bank. This
could happen even though the cancelled
checks submitted to the accountant were
compared with the record of disburse­ments,
unless they were added or were
checked in detail to the bank statement.
When it is said that the footing of the
cash book and comparison of the checks
cannot be dispensed with, it is not meant
that a complete audit of these entries must
be made. Intensive tests are usually suffi­cient
unless they disclose some indication
of irregularity which may call for more
checking.
Some test should always be made to
determine, if possible, whether the specific
items entered as cash receipts have been
deposited, or if this cannot be done, to
determine whether certain items in the ag­gregate
have been deposited. It is gen-