Archer Uniforms Inc. is a distributor of professional uniforms to retail stores that sell work clothing to professionals such as doctors, nurses, and security guards. Traditionally, most of the sales are to retail stores throughout Canada and the United States. Most shipments are processed in bulk for direct delivery to retail stores or to the corporate warehouse distribution facilities for retail store chains. In early 2016, Archer Uniforms began offering the sale of uniforms directly to professionals through its company website. Professionals can access information about uniform styles,sizes, and prices. Purchases are charged to the customer's personal credit card. Management made this decision based on its conclusion that the online sales would tap a new market of professionals who do not have easy access to retail stores. Thus, the volume of shipments to retail stores is expected to remain consistent.
Given that Archer's IT staff lacked the experience necessary to create and support the online sales system, management engaged an IT consulting fi rm to design and maintain the online sales system.
REQUIRED
a. Before performing analytical procedures related to the human resources and payroll cycle accounts, develop expectations of how these recent events at Archer Uniforms Inc. will affect payroll expense for the following departments during 2016 compared with prior years' payroll expense. Indicate the degree (extensive, moderate, little) to which you expect the payroll expense account balance to increase or decrease during 2016, with reasons supported by the facts of the case.
1. Warehouse and shipping department.
2. IT department.
3. Accounts receivable department.
4. Accounts payable department.
5. Receiving department.
6. Executive management.
7. Marketing.
b. Provide additional audit procedures (by assertion) that might be required.