For each of the following situations, draft an audit procedure appropriate to address the audit concern. Include any documents you need and describe the direction of the test.
(a) You are auditing an agribusiness/farming company in California. You are aware that the company needs seasonal workers to harvest crops and are addressing the possibility of illegal acts related to employing undocumented workers.
(b) You are auditing a non-public financial services company that compensates management with bonuses in addition to base salary. Bonuses are supposed to be determined and approved by the Board of Directors. Your audit concern is that management may have somehow authorized bonuses that were not approved by the Board of Directors.
(c) You are auditing a company that awards employees 3 weeks of vacation per year and permits each employee to carry over 2 weeks of unused vacation at the end of each year. Your audit concern is that the vacation pay liability shown on the balance sheet may be too small because of increases in the average pay rate of the company’s employees.
(d) You are auditing a company that only needs to file payroll tax returns on a quarterly basis. You note that the company was late in filing its payroll tax returns. Your audit concern is whether the late filing reflects an ICFR problem or a cash flow problem.