Discussion:Quest on deposit in transit for the auditors

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Accounting Questions --> Quest on deposit in transit for the auditors

Orange2 (talk|edits) said:

1 April 2013
Seems simple but just needed to verify. I am doing an audit for a non-profit client - so from an auditing aspect, nonprofits can recognize revenue from an unconditional promise.

Client has recorded revenues from contributions "postmarked" before 12/31, but deposited on 1/15. They provided me no evidence to this postmark. They boooked as cash - deposit in transit. I am ok with recognizing the revenue in the audit year, but I am considering contribution receivable instead of cash.

Definition of "deposit in transit" cash received and deposited but not recorded yet by the bank. A 1/15 actual deposit clearly indicates something else. Would I be too harsh to reclasify to Contribution receivable?

Captcook (talk|edits) said:

2 April 2013
What is the risk? How do you test a "deposit in transit"? By reviewing the bank account reconciliation. How do you test receivables? By testing subsequent receipt. Both are current assets.

I think I've spent more time responding to this question than I would have spent auditing this particular item.

The client and I would likely have a bit of a discussion on what a delay in depositing as you mention says about their controls though. This is the issue to focus on.

Fsteincpa (talk|edits) said:

2 April 2013
SFAS 116/117?

Natalie (talk|edits) said:

April 3, 2013
It sounds like it may have been cash on hand as of 12/31/12. Agreed the more important thing is a discussion about holding checks, which actually is quite typical of nonprofit organizations.

Fsteincpa (talk|edits) said:

3 April 2013
Also typical of cash basis taxpayers trying to shift the income into a different year.

Natalie (talk|edits) said:

April 3, 2013
For a for-profit entity, yes, but in this case it sounds like the revenue should be recognized anyway.

To join in on this discussion, you must first log in.
Personal tools