Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 29DQP
a.
To determine
State for all the situations whether the control is an automated application control (AC), a manual control (MC) or a manual control with an automated component (MAC).
b.
To determine
List the transaction-related audit objective which gets affected by the control.
c.
To determine
Classify whether the given internal controls should be tested or not.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Using this supplemental information, analyze the flowchart in the diagram.
The personnel department determines the wage rate of all employees. To start the process, personnel sends the payroll coordinator, George Jones, an authorization form in order to add an employee to the payroll. After Jones enters this information into the system, the computer automatically determines the overtime and shift differential rates for the individual, updating the payroll master files.
Employees use a time clock to record the hours worked. Every Monday morning, George Jones collects the previous week’s time cards and begins the computerized processing of payroll information to produce paychecks the following Friday. Jones then reviews the time cards to ensure that the hours worked are correctly totaled; the system determines overtime and/or any shift differential.
Jones performs all other processes displayed on the flowchart. The system automatically assigns a sequential number to each payroll check…
Payroll: Risks and Controls
Below are some of the processes that are typically executed before, during, and after a payroll cycle:
Employees record their hours worked.
The supervisor reviews and approves each employee's time records with their signature.
An officer from the Human Resources department updates employee files after receiving authorized records of overtime and leaves (vacations, illness, etc.) from the supervisor. Afterward, approved records are sent to the payroll officer in the accounting department.
The payroll officer calculates the gross payment, applies deductions, and calculates the net payment. Subsequently, the final payroll is sent for the controller's approval.
Payments are issued to employees using their preferred delivery method (check or direct deposit).
Entries are generated for the corresponding payroll transactions.
Withholdings for payroll taxes, Social Security, and Medicare are respectively remitted to the Department of Treasury and the Internal…
Automated Application Controls. The following provides a brief description of the computerized payroll system used by Merriman in its biweekly processing of payroll for its employees.1. Employees automatically record their attendance (hours worked) as they log in at thebeginning and end of the workday.2. At the end of each payroll period (every two weeks), employees print and authorizetheir attendance records, submitting them to their supervisor. The computer prenumbersthese attendance records and generates them in chronological order based on when theemployee submits his or her final attendance for that payroll period.3. Supervisors review the attendance records submitted by their employees and authorizethese records, which the supervisors then forward to data entry conversion operators.4. Data conversion operators input the attendance record number, employee number, andhours worked from the attendance records that have been approved by the employeesupervisors into a file to be used…
Chapter 12 Solutions
Auditing And Assurance Services
Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Describe how the nature of evidence used to...Ch. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16.1MCQCh. 12 - Prob. 16.2MCQCh. 12 - Prob. 16.3MCQCh. 12 - Prob. 17.1MCQCh. 12 - Prob. 17.2MCQCh. 12 - Prob. 17.3MCQCh. 12 - Prob. 18.1MCQCh. 12 - Prob. 18.2MCQCh. 12 - Prob. 18.3MCQCh. 12 - Prob. 19.1MCQCh. 12 - Prob. 19.2MCQCh. 12 - Prob. 19.3MCQCh. 12 - Prob. 20DQPCh. 12 - Prob. 21DQPCh. 12 - Prob. 22DQPCh. 12 - Prob. 23DQPCh. 12 - Prob. 24DQPCh. 12 - Prob. 25DQPCh. 12 - Prob. 26DQPCh. 12 - Prob. 27DQPCh. 12 - A CPAs client, Boos Baumkirchner, Inc., is a...Ch. 12 - Prob. 29DQPCh. 12 - Prob. 30DQPCh. 12 - Based on a cost-benefit analysis, management at...Ch. 12 - Prob. 32DQPCh. 12 - Prob. 33DQPCh. 12 - Prob. 34DQP
Knowledge Booster
Similar questions
- As the internal auditor for Permalite Products, you have been asked to document the company's payroll processing system. Based on your documentation, Permalite hopes to develop a plan for revising the current system to eliminate unnecessary delays in pay cheque processing. The head payroll clerk explained the system: The payroll processing system at Permalite Products is fairly simple. Time data are recorded in each department using time cards and clocks. It is annoying, however, when people forget to punch out at night, and they have to record their time by hand. At the end of the period, their payroll clerks enter the time card data into a payroll file for processing. The clerks are pretty good—though they have had to make a number of corrections when they mess up the data entry. Before the payroll file is processed for the current period, human resources send personnel changes, such as increases in pay rates and new employees. The clerks enter this data into the payroll file.…arrow_forwardAs the internal auditor for Permalite Products, you have been asked to document the company’s payroll processing system. Based on your documentation, Permalite hopes to develop a plan for revising the current system to eliminate unnecessary delays in pay cheque processing. The head payroll clerk explained the system: The payroll processing system at Permalite Products is fairly simple. Time data are recorded in each department using time cards and clocks. It is annoying, however, when people forget to punch out at night, and they have to record their time by hand. At the end of the period, their payroll clerks enter the time card data into a payroll file for processing. The clerks are pretty good—though they have had to make a number of corrections when they mess up the data entry. Before the payroll file is processed for the current period, human resources send personnel changes, such as increases in pay rates and new employees. The clerks enter this data into the payroll file.…arrow_forwardAutomated Application Controls: Input Controls. In its automated processing systemover payroll transactions, Brady Company enters the following data from its employees’attendance records (# corresponds to a numeric field; A corresponds to an alphabetic field):∙ Employee number (##-#-##, the employees’ Social Security number).∙ Entity division (AA#, an alphanumeric field containing two letters corresponding to thelocation of the employee and two numbers corresponding to that employees’ supervisor).∙ Hours worked (##.#, a weekly total of hours worked in 0.25-hour increments).After data entry, these data are processed against the information maintained in thatemployee’s master file record. The records are accessed based on employee number. If theemployee is an hourly employee, the number of hours worked is multiplied by the pay rate; ifa salaried employee, the hours worked are checked against a range of acceptable hours. Afterthe gross pay is determined, information in the master file…arrow_forward
- The following describes the payroll procedures for a hypothetical company.Every Thursday, the timekeeping clerk sends employee time cards to the payroll department for processing. Based on the hours worked reflected on the time cards, the employee pay rate and withholding information in the employee file, and the tax rate reference file, the payroll clerk calculates gross pay, withholdings, and net pay for each employee. The clerk then manually prepares paychecks for each employee, files hard copies of the paychecks in the payroll department, and posts the earnings to the hard-copy employee records. Finally, the clerk manually prepares a payroll summary and sends it and the paychecks to the cash disbursements department. The cash disbursements clerk reconciles the payroll summary with the paychecks and manually records the transaction in the hard-copy cash disbursements journal. The clerk then files the payroll summary and sends the paychecks to the treasurer for signing. The signed…arrow_forwardAs the internal auditor for Permalite Products, you have been asked to document the company’s payroll processing system. Based on your documentation, Permalite hopes to develop a plan for revising the current system to eliminate unnecessary delays in pay cheque processing. The head payroll clerk explained the system: The payroll processing system at Permalite Products is fairly simple. Time data are recorded in each department using time cards and clocks. It is annoying, however, when people forget to punch out at night, and they have to record their time by hand. At the end of the period, their payroll clerks enter the time card data into a payroll file for processing. The clerks are pretty good—though they have had to make a number of corrections when they mess up the data entry.in Before the payroll file is processed for the current period, human resources send personnel changes, such as increases in pay rates and new employees. The clerks enter this data into the payroll file.…arrow_forwardIn an automated payroll processing environment, a department manager substituted the time card for a terminated employee with a time card for a fictitious employee. The fictitious employee had the same pay rate and hours worked as the terminated employee. The best control technique to detect this action using employee identification numbers would be aa. batch total.b. record count.c. hash total.d. subsequent check.e. financial total.arrow_forward
- Payroll Processed by a Service Organization. Assume that you are the audit senior conducting a review of a new client’s payroll system. In the process of interviewing the payroll department manager, she makes the following statement: “We don’t need many controls because our payroll is done outside the company by Automated Information Processing, a service bureau.”Required:Evaluate the payroll department manager’s statement and describe how a service organization affects an auditor’s review of controls.arrow_forwardWhich of the following activities performed by a department supervisor most likely would help to prevent or detect a payroll fraud?a. Distributing paychecks directly to department employees.b. Setting the pay rate for departmental employees.c. Hiring employees and authorizing them to be added to payroll.d. Approving a summary of hours each employee worked during the pay period.arrow_forwardSwenson Company has the following payroll procedures.Identify the payroll function to which each procedure pertains. Payroll Procedures Payroll Function (a) Supervisor approves overtime work. Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeeping (b) The human resources department prepares hiring authorization forms for new hires. Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeeping (c) A second payroll department employee verifies payroll calculations. Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeeping (d) The treasurer’s department pays employees. Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeepingarrow_forward
- Match the four functions of payroll activities with their related internal controls: a. An independent employee should sign and distribute the prenumbered checks. select a function Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeeping b. Supervisors should monitor hours worked through time reports. select a function Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeeping c. Human Resources department should authorize employment. select a function Hiring EmployeesPaying the PayrollPreparing the PayrollTimekeeping d. Two or more employees should verify payroll amounts. select a functionarrow_forward9 List of Statements 1. The payroll department should use personnel action forms (new employees and terminated employees) to validate employees before they are issued a check. 2. Upon completion, the daily time cards are routed to the cost accountants who use them to post the labor costs to specific WIP accounts such as direct labor, indirect labor and overhead. Which of the statement(s) above is(are) invalid? O Both statements are valid O Statement 2 O Statement 1 Both statements are invalid Answer onlyarrow_forwardWhich control activity is the entity implementing when at the end of each month, an HR clerk is reviewing the employees hours for payroll calculation ? Select one: a Independent checks on performance b. Adequate separation of duties c. Physical control over assets and records d. Adequate documents and recordsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE LAuditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:9781133935940
Author:Ulric J. Gelinas
Publisher:CENGAGE L
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning