Final answer:
To test for the completeness of cash receipts, an auditor would primarily observe the consistent use of cash registers and tapes by employees. In a scenario where an employee's cash drawer is consistently short, they should collect data to compare with recorded amounts, understand the check payment process, and know about overdrafts to address the issue.
Step-by-step explanation:
To test controls relating to management's assertion about the completeness of cash receipts for cash sales at a retail outlet, an auditor would most likely perform the following procedure:
- Observe the consistency of the employees' use of cash registers and tapes to ensure that all cash sales are being recorded properly.
This procedure helps in verifying that the cash sales are fully recorded by observing the actual process. However, let's consider the scenario mentioned.
Scenario: Dealing with a Short Cash Drawer
An employee labeled as a thief for a short cash drawer can take several steps:
- Collect data from cashiers or customers to compare with the recorded amounts.
- Understanding the payment methods such as checks, which require a bank and personal identification to process, could provide insights into the discrepancies.
- Knowing what an overdraft is—it's when an account lacks sufficient funds for a transaction, but the bank allows it, possibly leading to negative balances.
Confronting the Issue
The employee should gather evidence and present the findings to the management to clear their name, including reviewing surveillance tapes, cash register logs, and counting procedures. Monitoring of cash handling procedures, such as proper use of registers and safeguarding undeposited cash, can help in revealing the true cause of the shortfall.