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Chapter05 - Answer Applied Auditing
Chapter05 - Answer Applied Auditing
5-1. The following duties must be separated in the preparation of payroll: hiring,
reporting and approval of time, paycheck preparation, check signing, and
paycheck distribution.
5-2. Payroll checks should be prenumbered and accounted for in a bank reconciliation.
5-5. Auditors perform three procedures that provide evidence that all production
transactions that occur are recorded. First, auditors observe that prenumbered
production orders are accounted for to determine that all materials issued are
recorded. An auditor might also account for a sequence of production orders.
Finally, an auditor might observe that a clerk reconciles completed and charged
time tickets with the total hours for which production workers are paid.
5-6. 1) c 2) b
5-7. 1) d 2) d 3) b 4) b
5-8. 1) d 2) c
5-9. 1) a 2) a
5-10. 1) d 3) d 5) c
2) b 4) d 6) c
4. a. Existence or occurrence
b. Payroll may include fictitious or former employees.
c. Observe separation of duties.
d. For selected entries, examine signed authorizations for hiring, pay rates,
and deductions, and compare signature on paid check to signature on
application, or distribute paychecks in a surprise payoff.
5. a. Completeness
b. Paychecks may be issued but not recorded.
c. Observe whether paychecks are prenumbered and determine whether a
bank reconciliation is prepared by a person independent of the payroll
function.
d. Test or prepare a bank reconciliation.
6. a. Completeness
b. Paychecks may be issued but not recorded.
c. Observe whether a bank reconciliation is prepared by a person
independent of the payroll function.
d. Test or prepare a bank reconciliation.