SHORT ANSWER · PROOF OF CASH
Why do auditors use a proof of cash?
Auditors use a proof of cash because it catches receipts or disbursements that were never recorded, which a balance-only reconciliation can hide. If money came in and the same amount went out unrecorded, the ending balance still agrees; comparing receipts and disbursements shows the gap. Choosing a tool? See the best proof of cash software.
WORKED NUMBER
What does a balance-only reconciliation miss?
It misses activity that cancels itself out. Take Matter 25-117 for March and suppose a 1,000.00 deposit and a 1,000.00 withdrawal both went through the bank, with neither one in the books.
| Balance-only reconciliation | Proof of cash | |
|---|---|---|
| Ending balance | Ties at 18,428.15 | Ties at 18,428.15 |
| Receipts | Not compared | Bank 9,620.00 vs books 8,620.00, 1,000.00 off |
| Disbursements | Not compared | Bank 6,094.20 vs books 5,094.20, 1,000.00 off |
| Result | Looks clean | Two unrecorded items to explain |
Bank figures here include the 500.00 deposit in transit and outstanding check 3290 for 312.40. The 1,000.00 pair is an example added for this page.
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WHEN
When do auditors reach for one?
When cash is a risk area, such as weak controls over receipts or a reason to think money moved outside the books. Run month by month across the year, it also shows which month a difference started in.
It only works if the bank side is complete. ZeraBooks proves each statement to its printed closing and flags a month whose opening doesn’t match the last one, so a missing statement can’t hide activity. Investigators use the same method; see how is a proof of cash used in a fraud investigation? and the full table in what is the difference between a proof of cash and a bank reconciliation?
Is a proof of cash required in an audit?
It isn’t a required step everywhere. Auditors choose it as a substantive test when cash risk calls for more than a balance check.
Does a proof of cash find fraud on its own?
No. It shows a difference that needs explaining. Someone still has to find what the money was and why it wasn’t recorded.
What if a statement is missing?
Then that month can’t be proven. Get the statement first, because the missing month carries its own receipts and disbursements.
FREE CUSTOM BUILD
Test the activity,
not only the balance.
ZeraBooks proves every statement first, so the receipts and disbursements you compare are the bank’s own.