You are the senior auditor in charge of the annual audit of Onward Manufacturing Corporation for the
Question:
(1) Labor hours and
(2) Last four digits of Social Security numbers. These data are input into a disk file, batch balanced, and batch processed. The clock cards (with cost classification data) are sent to the cost accounting department. The payroll system is computerized. As each person’s payroll record is processed, the Social Security number is matched to a table (in a separate master file) to obtain job classification and pay rate data, then the pay rate is multiplied by the number of hours, and the check is printed. (Ignore payroll deductions for the following requirements.)
Required:
a. What audit procedures would you recommend to obtain evidence that payroll data are accurately totaled and transformed into machine- readable records? What deviation rate might you expect? What tolerable deviation rate would you set? What “items” would you sample? What factors should you consider in setting the size of your sample?
b. What audit procedures would you recommend to obtain evidence that the pay rates are appropriately assigned and used in figuring gross pay? In what way, if any, would these procedures be different if the gross pay were calculated by hand instead of on a computer?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws
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