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Audit Area Substantive Test <br /> Cash and investments — Send bank confirmation forms(completed by management)or <br /> initiate electronic confirmations to respective financial <br /> institutions,compare confirmed balances to bank statements, <br /> and investigate discrepancies. <br /> - Consider compliance of investments in accordance with State <br /> statute and the government's investment policy. <br /> - Agree book balances to a trial balance account(or group of <br /> accounts for pooled cash systems). <br /> — Test bank reconciliations by tracing deposits in transit and <br /> outstanding checks to the subsequent period statement. Trace <br /> inter-bank transfers in transit between account reconciliations. � <br /> Identify outdated or unusual reconciling items. <br /> — Consider the appropriateness of accrued interest on certificates <br /> of deposit and investments. <br /> - Calculate Federal Depository Insurance Coverage(FDIC). <br /> Receivables — Obtain subledgers for significant account balances. Select <br /> items for detail testing and obtain subsequent receipt noting <br /> whether the amount was earned prior to year end and received <br /> in the next period. <br /> — Consider whether any receivables in governmental funds are <br /> collected outside of the period of availability (as it is defined <br /> by the government)and should be deferred in the fund <br /> financial statements. <br /> - Trace grant receivables to financial status reports,subsequent <br /> receipts,and/or determine whether the recorded receivable is <br /> equal to grant expenditures,less actual cash receipts. <br /> - Trace special assessments receivable to signed special <br /> assessment rolls. Perform a rollforward of special assessments <br /> by taking the prior year receivable,subtracting special <br /> assessment revenue from the trial balance or financial <br /> statements,adding new assessments levied,and comparing the <br /> result to the amount of the current receivable: <br /> Inventory Compare detailed listings of items, individual cost, and <br /> extended cost to the general ledger control accounts. <br /> — Inquire about obsolete inventory. <br /> Prepaids` — Determine the nature of prepaid items in each general ledger <br /> account. <br /> Recalculate prepaid balance using invoices and check <br /> vouchers and determine whether the amount was paid prior to <br /> year-end. <br /> 70 <br />