Khalia Brewer
Accct 555
Week 7
Homework
20-17
A.(2)- have a paymaster who has no other payroll responsibility distribute the payroll checks.
B.(3)- Employees might be paid for hours they did not work.
C.(3)- authorization of transactions from the custody of related assets.
20-20
|TYPE OF TEST |TRANSACTION-RELATED AUDIT OBJECTIVE(S) |
|1. Substantive test of |To determine if monthly payroll costs have been correctly allocated (accuracy). |
|transactions | |
|2. ...view middle of the document...
To determine whether an obligation may exist for unpaid severance pay |
| |(completeness). |
21-17
A.(3)- The perpetual inventory system will not allow an addition of inventory to be posted without entry of a valid receiving report number.
B.(2)- forwarded to the receiving department.
C.(1)- Maintain a perpetual inventory master file of only the more valuable items with frequent periodic verification of the validity of the perpetuals.
21-18
A.(1)-Costs have been correctly assigned to finished goods, work-in-process, and cost of goods sold.
B.(2)- Receiving reports
C.(2)- Purchasing agents who arrange for shipment of raw materials from vendors are responsible for verifying actual receipt of the inventory items at the receiving dock.
21-19
A.(4)- Examine documentation supporting the acquisition of highly material inventory items on hand at the count date.
B.(3)- The existence of obsolete merchandise.
C.(2)- Percentage of slow-moving inventory items.
21-20
|PURPOSE OF INTERNAL CONTROL |TEST OF CONTROL |POTENTIAL FINANCIAL |SUBSTANTIVE AUDIT |
| | |MISSTATEMENT |PROCEDURE |
|1. For a proper valuation of inventory. |Examine receiving and |Misstatement of inventory. |Compare physical count to |
|(Accuracy) |requisition documents, trace | |perpetual inventory |
| |to perpetual records. | |record. |
|2. To make sure physical inventory counts|Observe counting personnel and|Misstatement of inventory. |Compare physical count to |
|are accurate. |discuss with client. | |perpetual inventory |
|(Accuracy, existence and completeness) | | |record. |
|3. To make sure inventory compilation is |Observe who compiles the |Misstatement of inventory. |Reperform clerical tests |
|accurate. |inventory and discuss with | |of inventory compilation. |
|(Accuracy) |client. | | |
|PURPOSE OF INTERNAL CONTROL |TEST OF CONTROL |POTENTIAL FINANCIAL |SUBSTANTIVE AUDIT |
| | |MISSTATEMENT |PROCEDURE |
|4. To ensure inventory |Account for a numerical |Understatement of inventory |Trace quantity and |
|is recorded...
