1. The following are questions from an internal control questionnaire for the production cycle. Assume that the answer to each question is no.

a) Are standard costs used? If so, are they reviewed periodically?

b) Are summary entries reviewed and approved by the cost accounting supervisor?

c) Is access to blank material requisition forms restricted to authorized persons?

d) Is accounting notified of terms on purchase agreements?

e) Are labor usage reports compared to job time tickets?

Required: For each question (a e) determine the following:

I. Assertion addressed

A. Existence or Occurrence

B. Rights and Obligations

C. Completeness

D. Valuation

E. Presentation and Disclosure

II. Example of an error fraud that could occur

1. Errors in summary entries not detected and corrected.

2. Inventory transactions posted in wrong period. Cutoff errors.

3. Scrap reporting incorrect. Incorrect perpetual inventories.

4. Failure to disclose agreements in footnotes.

5. Materials withdrawn from inventory or hours worked for unauthorized projects.

6. Lost forms resulting in inventory not charged to Cost of Goods Sold.

7. Incorrect costs used; inventory improperly valued.

8. Production orders lost and accounting incomplete.

9. Labor or material used but not recorded.

10. Errors in labor costs.