3air_im11 - 10 CHAPTER 11 Production and Payroll Cycle...

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10 CHAPTER 11 Production and Payroll Cycle LEARNING OBJECTIVES Review Checkpoint s Exercises and Problems Cases 1. Describe the production cycle, including typical source documents and controls. 1, 2, 3, 4, 5, 6, 7, 8, 9 51 2. Give examples of detail test of controls procedures for auditing the controls over conversion of materials and labor in a production process. 10, 11, 12, 13, 14, 15 52, 53 64 3. Describe some common errors, irregularities, and frauds in the accounting for production costs, and related cost of goods sold, and design some audit and investigation procedures for detecting them. 16, 17, 18, 19 54 65, 66 4. Describe the payroll cycle, including typical source documents and controls. 20, 21, 22, 23, 24, 25, 26, 27, 28 55, 59 38, 61, 62, 68 5. Give examples of detail test of controls procedures for auditing the controls over payroll. 29, 30, 31, 32, 33 56, 57, 60 39, 63, 69 6. Describe some common errors, irregularities, and frauds in payroll, and design some audit and investigation procedures for detecting them. 34, 35, 36, 37 56, 57, 58 39, 66, 67, 69 POWERPOINT SLIDES PowerPoint slides are included on the website. Please take special note of: * Production Cycle * Payroll Cycle SOLUTIONS FOR REVIEW CHECKPOINTS 11.1 Production planning Inventory planning Production Cost accounting
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11 11.2 Auditors must understand management's approach to the conversion of resources and the unique production process to understand the flow of transaction processing. Without a thorough understanding of the production process, the related data processing and cost accounting cannot be fully comprehended and weaknesses in internal control can be overlooked. Of all the transaction cycles, this will be the most likely to be different for each client. 11.3 A walk-through of a production transaction will collect the following documents: Production order Bill of materials Materials requisitions Inventory record (raw materials issue) Journal entry (moving raw materials to work in process) Labor report (time records) Journal entry (charging labor to work in process) Production cost analysis Inventory record (finished goods addition) Journal entry (moving work in process to inventory) A "walk through" involves following a transaction from initiation through the various steps until the transaction is recorded in the formal accounting records. In the conversion cycle, the following would constitute a complete "walk through:" Please refer to the PowerPoint slides included on this CD. Step Documents Collected Controls Noted Prepare production orders Production Order (P.O.) Support for P.O. Prepare bill of materials and manpower needs Bill of materials (B.M.) Manpower needs (M.N.) Separation planning from production.
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This note was uploaded on 02/08/2012 for the course IAF IAF520 taught by Professor Aldcorn during the Winter '08 term at Seneca.

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3air_im11 - 10 CHAPTER 11 Production and Payroll Cycle...

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