There are 4 testing methods for testing the effectiveness of controls (Inquiry, Observation, Document Examination, and Re-performance).

Provide an example of how Jims audit team could use each of the testing methods to test operating effectiveness of the controls below for automated processing of payroll transactions:

1. A system log is generated and reviewed on a weekly basis to identify an unauthorized access to payroll programs and processing. The report shows programs accessed during the past week, the individual(s) who accessed those programs, and the time(s) the programs have been accessed. Any inconsistency is investigated immediately.
2. Controls numbers are determined and then compared to the actuals following transaction processing.
3. Jims highest paid employee processed through the system earns $360,000 per year so any gross pay calculations in excess of $30,000 per month are identified and written to a rejected transaction file for further investigation.
4. An error/unusual report is generating through processing. The report is then reviewed, investigated, and the solutions documented.
5. To ensure payroll is properly authorized by the appropriate personnel, any changes to employee master file information are evaluated.
6. The output is examined for rationality prior to distribution to users.

Also Note: Not all methods are appropriate for all controls.