Auditing

* Your answer is incorrect. You are reviewing the audit work for Online Ltd, a large Canadian company. Online uses a service bureau to process all wages. Time sheets are authorized by the appropriate supervisor, batched, and sent to the service bureau for processing, Detailed payroll reports, as well as the time sheets, are returned to the accountant, who reviews the reports for reasonableness and initials them as evidence of her review. Your audit assistant performed a month-to-month comparison of wages and found no abnormal trends. The following conclusion was noted on the working paper: "I have checked that all payroll reports from the period were reviewed and initialled by the client. This, in conjunction with the results of analytical review, led me to conclude that the payroll expense is fairly stated." What additional questions will you ask or what audit procedures will you suggest to ensure payroll is fairly stated? Compare monthly figures to expectations No further work is required Was there a change in the number of staff during the year? Obtain a report from the service entity auditor What was the level of control risk assessed? How much time was spent on the review of payroll expense? Current Attempt in Progress * Your answer is incorrect. What computer-assisted audit procedures could be used in testing controls over purchasing? Testing the pricing against pre-approved supplier price lists Checking pre-numbering of purchase orders Verifying the accuracy of revenue recorded Matching of purchase orders with receiving reports Vouching the cash received to the bank reconciliation Your answer is incorrect Which of the following is true with respect to auditing purchases, payables, and payroll? A. The auditor should be aware of pressures to overstate payables in order to report a higher level of working capital in the face of liquidity problems or going concern doubts. B. The auditor should be aware of contentious accounting issues, such as whether a cost should be capitalized or expensed, that relate to the accuracy and valuation assertion C. A major concern for the auditor is that those involved in the payroll process may, in error, underpay employees. D. When assessing the control environment to determine the control risk, the auditor should be aware that purchasing agents may be subjected to pressures from suppliers, such as offers of kickbacks for doing more business with those suppliers. E. Because of the materiality of the payables process, the auditor almost always takes a substantive approach. When auditing payroll the assertion of most concern is occurrence. G. The level of expenditure both for cost of goods sold and other costs will to some extent be affected by levels of revenue. Therefore, an understanding of the sales cycle can lead to an understanding of an entity's expenditure cycles and help in assessing the possibility of misstatements in these areas