audit boynton

Download Audit Boynton

Post on 22-Dec-2015

6 views

Category:

Documents

2 download

Embed Size (px)

DESCRIPTION

Accounting

TRANSCRIPT

  • Modern Auditing:Assurance Services and the Integrity of Financial Reporting, 8th EditionWilliam C. BoyntonCalifornia Polytechnic State University at San Luis ObispoRaymond N. JohnsonPortland State UniversityChapter 16 Auditing the Production and Personnel Services Cycles

  • Chapter Overview

  • Interface of Production Cycle with Other Cycles

  • Audit Objectives

  • Understanding the Entity and Environment

  • Analytical Procedures

  • Inherent RiskVolume of transactions

    Cost issues

    Diversity of inventory items

    Storage at multiple locations

    Determination of quality and value

    Vulnerability of inventory

    Right of return and repurchase agreements

  • Consideration of Internal Controls Common Documents and RecordsProduction order

    Material requirements report

    Materials issue slip

    Time ticket

    Move ticket

    Daily production report

  • Consideration of Internal Controls Common Documents and RecordsCompleted production report

    Standard cost master file

    Raw materials inventory master file

    Work-in-progress inventory master file

    Finished goods inventory master file

  • Functions and Related ControlsInitiating productionPlanning and controlling production

    Production of InventoryIssuing raw materialsProcessing goods in productionTransferring completed work to finished goodsProtecting inventories

  • Functions and Related ControlsRecording manufacturing and inventory transactionsDetermining and recording manufacturing costsMaintaining correctness of inventory balances

    Management Controls

    Additional Inventory Controls

  • Systems Flowchart Manufacturing Transactions

  • Systems Flowchart Manufacturing Transactions

  • Inventory AuditsPreliminary Audit Strategies

    Substantive Tests of InventoryInitial Procedures

    Analytical Procedures

  • Substantive Tests of InventoryTests of Details of TransactionsTest Entries to Inventory AccountsTest Cutoff of Purchases, Manufacturing, and Sales Transactions

    Tests of Details of BalancesObservation of the Clients Physical Inventory CountTiming and Extent of the TestInventory-Taking PlansPerforming the Test

  • Substantive Tests of InventoryTests of Details of BalancesInventories Determined by Statistical Sampling

    Observation of Beginning Inventories

    Test Clerical Accuracy of Inventory Listings

    Test Inventory Pricing

    Test Cost of Manufactured Inventories

  • Substantive Tests of InventoryConfirm Inventories at Locations Outside the EntityExamine Consignment Agreements and Contracts

    Tests of Details of Accounting Estimates

    Comparison of Statement Presentation with GAAP

  • Study BreakThis analytical procedure commonly used in the audit of the production cycle is useful in measuring the effectiveness of the manufacturing process.Inventory Turn DaysInventory Growth to Cost of Sales GrowthFinished Goods Produced to Direct LaborProduct Defects per Million

    D. Product Defects per Million

  • Study BreakThis document is a record of time worked by an employee on a specific job.Production orderTime ticketMove ticketStandard cost master file

    B. Time ticket

  • Study BreakAll of the following are functions of the manufacturing process, except:Initiating productionInitiating purchasesProduction of inventoryRecording manufacturing and inventory transactions

    B. Initiating purchases

  • The Personnel Services Cycle

  • Audit Objectives

  • The Personnel Services CycleUnderstanding the Entity and Environment

    Analytical Procedures

    Inherent Risk

  • Analytical Procedures

  • Consideration of Internal Controls Common Documents and RecordsPersonnel authorization

    Clock card

    Time ticket

    Payroll register

    Imprest payroll bank account

    Payroll check

  • Consideration of Internal Controls Common Documents and RecordsLabor cost distribution summary

    Payroll tax returns

    Employee personnel file

    Personnel data master file

    Employee earnings master file

  • Functions and Related ControlsInitiating payroll transactionsHiring employeesAuthorizing payroll changes

    Receipt of servicesPreparing attendance and timekeeping data

  • Functions and Related ControlsRecording and paying payroll transactionsPreparing the payrollRecording the payroll

    Paying payrollPaying the payroll Protecting unclaimed wagesFiling payroll tax returns

  • Systems Flowchart Payroll Transactions

  • Systems Flowchart Payroll Transactions

  • Personnel Services AuditsPreliminary Audit Strategies

    Substantive Tests of Personnel ServicesInitial Procedures

    Analytical Procedures

  • Substantive Tests of Personnel ServicesTests of Details of TransactionsTest Entries to Inventory AccountsTest Cutoff of Personnel Services Transactions

    Tests of Details of Balances and DisclosuresRecalculate Accrued Payroll LiabilitiesAuditing Employee Benefits and Pension PlansAuditing Stock Options and Stock Appreciation Rights

  • Study BreakThis analytical procedure commonly used in the audit of the personnel services cycle may be a measure of productivity per employee.Average payroll cost per employee classificationRevenue per employeeTotal payroll as a percentage of revenuesPayroll tax expense as a percentage of gross payroll

    B. Revenue per employee

  • Study BreakThis record holds all pertinent employment data for each employee.Payroll registerPayroll tax returnsEmployee earnings master fileEmployee personnel file

    D. Employee personnel file

  • Study BreakThis report shows each employees name, gross earnings, payroll deductions, and net pay for a period.Clock CardTime TicketPayroll RegisterPayroll Check

    C. Payroll Register