EBK AUDITING+ASSURANCE SERVICES
17th Edition
ISBN: 9780135171219
Author: ARENS
Publisher: PEARSON CO
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Question
Chapter 20, Problem 1RQ
To determine
Identify the five general ledger accounts that can be affected by the payroll and personnel cycles.
Expert Solution & Answer
Explanation of Solution
The following are the general ledger accounts that are affected by the personnel cycle and payroll:
- Cash
- Direct labor
- Inventory
- Salary expense
- Construction in progress
- Commission expense
- Taxes withheld
- Wages payable
- Payroll tax expense
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Students have asked these similar questions
An auditor will most likely review an entity’s periodic accounting for the numerical sequence of shipping documents to ensure all documents are included to support management’s assertion about classes of transactions of:
Select one:
a. occurrence.
b. completeness
c. classification.
d. accuracy
An audit trail enables a person to trace a source document to its ultimate effect on the financial statements or work back from amounts in the financial statements to source documents. Describe in detail the audit trail for the following:
a. Purchases of inventoryb. Sales of inventoryc. Employee payroll
Below are some audit procedures. Classify each procedure according to the following types of audit
evidence: 1) inspection, 2) external confirmation, 3) recalculation, 4) observation, 5) inquiry of the client,
6) reperformance, and 7) analytical procedure. (each procedure can be used more than once or not at
all)
Audit Procedures
Count inventory items and record the amount in the audit working
papers.
Stand by the payroll time clock to determine whether any
employee "punches in" more than one time.
Calculate the ratio of cost of goods sold to sales as a test of
overall reasonableness of gross margin relative to the preceding
year.
Obtain information about the client's internal controls by asking
questions of client personnel.
Examine the purchase invoice for a piece of equipment and
ensure that the equipment was received and is in operation.
The auditor computes the debt covenant based on the financial
information to ensure that the client's calculation was performed
correctly.
Obtain…
Chapter 20 Solutions
EBK AUDITING+ASSURANCE SERVICES
Ch. 20 - Prob. 1RQCh. 20 - Prob. 2RQCh. 20 - Distinguish among a payroll master file, a W-2...Ch. 20 - Prob. 4RQCh. 20 - Prob. 5RQCh. 20 - Prob. 6RQCh. 20 - Prob. 7RQCh. 20 - Prob. 8RQCh. 20 - Prob. 9RQCh. 20 - Prob. 10RQ
Ch. 20 - Prob. 11RQCh. 20 - Prob. 12RQCh. 20 - Prob. 13RQCh. 20 - Prob. 14RQCh. 20 - Prob. 15RQCh. 20 - Prob. 16.1MCQCh. 20 - Prob. 16.2MCQCh. 20 - Prob. 16.3MCQCh. 20 - Prob. 17.1MCQCh. 20 - Prob. 17.2MCQCh. 20 - Prob. 17.3MCQCh. 20 - Prob. 18.1MCQCh. 20 - Prob. 18.2MCQCh. 20 - Prob. 18.3MCQCh. 20 - Prob. 19DQPCh. 20 - Prob. 20DQPCh. 20 - Prob. 21DQPCh. 20 - Prob. 22DQPCh. 20 - Prob. 23DQPCh. 20 - Prob. 24DQPCh. 20 - Prob. 25DQPCh. 20 - Prob. 26DQPCh. 20 - Prob. 27DQPCh. 20 - Prob. 28C
Knowledge Booster
Similar questions
- An audit strategy sets the direction, timing, and scope of an audit. Based on your audit knowledge, which of the following would be included in the audit strategy document? Select one:a. A flowchart of the entity's internal control system.b. The decision as to the combination of substantive testing and tests of control that would be adopted.c. The number of sales transactions to be tested.d. The results of the interim testing of payroll.arrow_forwardDescribe FOUR internal control procedures an auditor would expect the company to put in place in respect of inventoriesarrow_forwardBelow are five audit procedures, all of which are tests of transactions associated with the audit of the acquisition and payment cycle. Also below are the six general transaction-related audit objectives and the five management assertions. For each audit procedure, indicate (1) its audit objective, and (2) the management assertion being tested. Audit Objectives: A. Occurrence B. Completeness C. Accuracy D. Posting and Summarization E. Classification F. Timing Management Assertions: V. Occurrence W. Completeness X. Accuracy Y. Classification Z. Cutoff Audit Procedures 1. Foot the purchases journal and trace the totals to the related general ledger accounts. __________________ ______________________ 2. Recompute the cash discounts taken by the client. _____________________ _________________________ 3. Compare dates on cancelled checks with the bank cancellation date. _________________ __________________________ 4. Trace from a sample of cancelled checks to the…arrow_forward
- Suggest FOUR (4) Internal Control Evaluation Questionnaire (ICEQ) questions that are suitable when performing a payroll audit.arrow_forwardIdentify the eight accounts receivable balance-related audit objectives. For each objective, list one audit procedurearrow_forwardThe purpose of separating the duties of hiring personnel and distributing payroll checks is toseparate thea. Authorization of transactions from the custody of related assets.b. Operational responsibility from the record-keeping responsibility.c. Human resources function from the controllership function.d. Administrative controls from the internal accounting controls.arrow_forward
- When auditing the accounts receivable account on the balance sheet, an auditor’s proceduresmost likely would focus primarily on management’s assertion ofarrow_forwardWhich of the following is a preventive control?a. Reconciliation of a bank account.b. Recalculation of a sample of payroll entries by internal auditors.c. Separation of duties between the payroll and personnel departments.d. Detailed fluctuation analysis completed by the CFO for revenue.arrow_forwardDescribe a minimum of three ways Accounting Iinformation System can help minimize or eliminate inaccurate time and attendance data in a typical company's payroll activity.arrow_forward
- The following are specific balance-related audit objectives applied to the audit of accounts receivable (a. through i.) and management assertions about account balances (1 through 6). The list referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date. i (Click the icon to view the audit objectives.) i (Click the icon to view the management assertions.) Requirement For each specific balance-related audit objective, identify the appropriate management assertion. (Hint: See table.) Specific balance-related audit objective There are no unrecorded receivables. b. Uncollectible accounts have been provided for. C. Receivables that have become uncollectible have been written off. d. All accounts on the list are expected to be collected within 1 year. The total of the amounts on the accounts receivable listing agrees with the general ledger balance for accounts receivable. a. e. Management assertionarrow_forwardAn audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible fora. Examining authorization forms for new employees.b. Comparing payroll registers with original batch transmittal data.c. Authorizing payroll rate changes for all employees.d. Hiring all subordinate payroll department employees.arrow_forwardWhat tools do auditors use to verify the ending balances in the various accounts in the acquisition and payments cycle? Please provide reference(s).arrow_forward
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