20-20 (Objectives 20-2, 20-3)Following are some of the tests of controls and substantive tests of transactions procedures often performed in the payroll and personnel cycle. (Each procedure is to be done on a sample basis or using audit software.)

• 1.Reconcile the monthly payroll total for direct manufacturing labor with the labor cost distribution.
• 2.Examine the time card for the approval of a foreman.
• 3.Recompute hours on the time card and compare the total with the total hours for which the employee has been paid.
• 4.Perform a surprise payroll payoff and observe employees picking up and signing for their checks.
• 5.Compare the employee name, date, check number, and amounts on cancelled checks with the payroll journal.
• 6.Trace the hours from the employee time cards to job tickets to make sure that the total reconciles, and trace each job ticket to the job-cost record.
• 7.Use audit software to account for the sequence of payroll checks in the payroll journal.

Required

• a.Identify whether each of the procedures is primarily a test of control or a substantive test of transactions.
• b.Identifythetransaction-relatedauditobjective(s)ofeachoftheprocedures.

21-21 (Objectives 21-1, 21-3, 21-5, 21-6, 21-7)The Frist Corporation has the following internal controls related to inventory:

• 1.Only authorized inventory warehousing personnel are allowed in inventory storage areas.
• 2.All inventory products are stored in warehousing areas that are segregated from other storage areas used to house equipment and supplies.
• 3.All inventory held on consignment at Frist Corporation is stored in a separate area of the warehouse.
• 4.The inventory purchasing system only allows purchases from pre-approved vendors.
• 5.The perpetual inventory system tracks the average number of days each inventory product number has been in the warehouse.
• 6.Microchips are embedded in each product and when inventory items are removed from the warehouse to shipping, radio-frequencies signal a deduction of inventory to the perpetual inventory system.
• 7.On a weekly basis, inventory accounting personnel take samples of inventory products selected from the perpetual inventory system and verify that the inventory is on-hand in the warehouse and that the quantities in the listing are correct.
• 8.On a weekly basis, inventory accounting personnel select inventory items on hand in the warehouse and verify that the item is included in the perpetual inventory listing at the correct amount.
• 9.The perpetual inventory system subtotals the quantity of inventory in the system and interfaces with the general ledger system on a daily basis to ensure quantities agree.
• 10.The perpetual inventory system will not accept inventory additions without the recording on a valid receiving report.

For each of the internal controls:

Required

• a.Identify the related transaction-related audit objective(s) affected by the control.
• b.Describe risks the control is designed to mitigate.
• c.Design a test of control to determine if the control is operating effectively.