ACT 4497 Lecture ch16

ACT 4497 Lecture ch16 - Assurance Services and the...

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Unformatted text preview: Assurance Services and the Integrity of th Modern Auditing: Modern Auditing: Financial Reporting, 8 Edition California Polytechnic State University at San Luis Obispo William C. Boynton Portland State University Raymond N. Johnson Chapter 16 – Auditing the Production and Personnel Services Cycles Chapter Overview Chapter Overview Interface of Production Cycle with Other Interface of Production Cycle with Other Cycles Audit Objectives Audit Objectives Understanding the Entity and Understanding the Entity and Environment Analytical Procedures Analytical Procedures Inherent Risk Inherent Risk • Volume of transactions • Cost issues • Diversity of inventory items • Storage at multiple locations • Determination of quality and value • Vulnerability of inventory • Right of return and repurchase agreements Consideration of Internal Controls – Consideration of Internal Controls – Common Documents and Records • Production order • Material requirements report • Materials issue slip • Time ticket • Move ticket • Daily production report Consideration of Internal Controls – Consideration of Internal Controls – Common Documents and Records • Completed production report • Standard cost master file • Raw materials inventory master file • Work­in­progress inventory master file • Finished goods inventory master file Functions and Related Controls Functions and Related Controls • Initiating production – Planning and controlling production • Production of Inventory – – – – Issuing raw materials Processing goods in production Transferring completed work to finished goods Protecting inventories Functions and Related Controls Functions and Related Controls • Recording manufacturing and inventory transactions – Determining and recording manufacturing costs – Maintaining correctness of inventory balances • Management Controls • Additional Inventory Controls Systems Flowchart – Manufacturing Systems Flowchart – Manufacturing Transactions Systems Flowchart – Manufacturing Systems Flowchart – Manufacturing Transactions Substantive Tests of Inventory Substantive Tests of Inventory • Tests of Details of Transactions – Test Entries to Inventory Accounts – Test Cutoff of Purchases, Manufacturing, and Sales Transactions • Tests of Details of Balances – – – – Observation of the Client’s Physical Inventory Count Timing and Extent of the Test Inventory­Taking Plans Performing the Test Substantive Tests of Inventory Substantive Tests of Inventory • Tests of Details of Balances – Inventories Determined by Statistical Sampling – Observation of Beginning Inventories – Test Clerical Accuracy of Inventory Listings – Test Inventory Pricing – Test Cost of Manufactured Inventories Substantive Tests of Inventory Substantive Tests of Inventory • Confirm Inventories at Locations Outside the Entity – Examine Consignment Agreements and Contracts • Tests of Details of Accounting Estimates • Comparison of Statement Presentation with GAAP The Personnel Services Cycle The Personnel Services Cycle Audit Objectives Audit Objectives The Personnel Services Cycle The Personnel Services Cycle • Understanding the Entity and Environment • Analytical Procedures • Inherent Risk Analytical Procedures Analytical Procedures Consideration of Internal Controls – Consideration of Internal Controls – Common Documents and Records • Personnel authorization • Clock card • Time ticket • Payroll register • Imprest payroll bank account • Payroll check Consideration of Internal Controls – Consideration of Internal Controls – Common Documents and Records • Labor cost distribution summary • Payroll tax returns • Employee personnel file • Personnel data master file • Employee earnings master file Functions and Related Controls Functions and Related Controls • Initiating payroll transactions – Hiring employees – Authorizing payroll changes • Receipt of services – Preparing attendance and timekeeping data Functions and Related Controls Functions and Related Controls • Recording and paying payroll transactions – Preparing the payroll – Recording the payroll • Paying payroll – Paying the payroll – Protecting unclaimed wages – Filing payroll tax returns Systems Flowchart – Payroll Systems Flowchart – Payroll Transactions Systems Flowchart – Payroll Systems Flowchart – Payroll Transactions Substantive Tests of Personnel Services Substantive Tests of Personnel Services • Tests of Details of Transactions – Test Entries to Payroll Accounts – Test Cutoff of Personnel Services Transactions • Tests of Details of Balances and Disclosures – Recalculate Accrued Payroll Liabilities – Auditing Employee Benefits and Pension Plans – Auditing Stock Options and Stock Appreciation Rights ...
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