Tests of Controls: Processing and Output Controls. Mark Company’s audit team is evaluating the controls that Mark has implemented over the automated processing of payroll transactions. During the understanding and assessment stages of the audit, the following processing and output controls have been identified as being important in this processing:
1. To detect unauthorized access to payroll programs and processing, a system log is generated and reviewed on a weekly basis. This log identifies the programs that have been accessed during the past week, the individual(s) who have accessed those programs, and the time(s) during which the programs have been accessed. This log is reviewed and any unexpected or unauthorized access is investigated immediately.
2. Control totals are determined prior to the input of data and compared to computer- generated totals following transaction processing.
3. Any gross pay calculations in excess of $ 25,000 per month are identified and written to a rejected transaction file for separate investigation because Mark’s highest paid employee whose salary is processed through the system earns $ 300,000 per year.
4. The system generates a report of any errors or unusual situations identified during trans-action processing. This report is reviewed and any items are resolved in a timely manner, and the resolution is documented by notations made on the report.
5. Any changes to employee master file information since the last payroll period are evaluated to ensure that they have been properly authorized by the appropriate personnel.
6. The output is reviewed for reasonableness prior to distribution to users.

Required:
Consider the four methods of testing the operating effectiveness of controls (inquiry, observation, document examination, and reperformance). For each of the preceding controls, provide an example of how Mark’s audit team might choose to test the operating effectiveness of the control using the four methods of test of controls ( for example, how would the audit team use inquiry, observation, document examination, and reperformance to test control # 1, the generation and review of the system log?).