How Does Big 4 Audit Firms Verify S-chips' Cash Balances

[arriyana]

The way auditors audit for cash balances are fairly straight forward. Cash must be held somewhere, either in physical form or banks.

Most of the time cash is held in numberous bank accounts. Auditors will prepare a letter of confirmation, get the client to sign for permission to retrieve account information, send the letter of confirmation to the banks and banks generally have a department dedicated to reply to auditors. Banks will then either confirm or disagree with the amount stated on the letter.

While visiting the bank branch itself is an option, generally audit fees do not justify the effort and time spent to verify. Hence rarely conducted unless there are reasonable suspicion.