The following misstatements are included in the accounting records of Newcomb & Company:

1. Direct labor was unintentionally charged to job 620 instead of job 602 by the payroll clerk when they key-entered the labor distribution sheets. Job 602 was completed and the costs were expensed in the current year, whereas job 620 was included in work-in-process. 

2. Two employees take turns “punching in” for each other every few days. The absent employee comes in at noon and tells the supervisor that they had car trouble or some other problem. The supervisor does not know that the employee is getting paid for the time.

3. The supervisor submits a fraudulent time record for a former employee each week and delivers the related payroll check to the employee’s house on the way home from work. They split the amount of the paycheck. 

4. Employees often overlook recording their hours worked on job-cost tickets as required by the system. Many of the client’s contracts are on a cost-plus basis. 

5. The payroll clerk prepares a check to the same nonexistent person every week when they enter payroll transactions in the computer system, which also records the amount in the payroll journal. They submit it along with all other payroll checks for signature. When the checks are returned to the clerk for distribution, they take the check and deposit it in a special bank account bearing that person’s name. 

6. In withholding payroll taxes from employees, the computer operator deducts $3.50 extra federal income taxes from several employees each week and credits the amount to their own employee earnings record. 

7. The payroll clerk manually prepares payroll checks but often forgets to record one or two checks in the computer-prepared payroll journal. 

Required

a. For each misstatement, state a control that should have prevented it from occurring on a continuing basis. 

b. For each misstatement, state a substantive audit procedure that could uncover it.