For each misstatement, state a substantive audit procedure that could uncover it.

Misstatement:

1. Direct labor was unintentionally charged to job 620 instead of job 602 by the payroll clerk when he key-entered the labor distribution sheets. Job 602 was completed and the costs were expensed in the current year, whereas job 620 was included in the work-in-process.

2. Joe Block and Frank Demery take turns "punching in" for each other every few days. The absent employee comes in at noon and tells his foreman that he had car trouble or some other problem. The foreman does not know that the employee is getting paid for the time.

3. The foreman submits a fraudulent time card for a former employee each week and delivers the related payroll check to the employee's house on the way home from work. They split the amount of the paycheck.

4. Employees often overlook recording their hours worked on job-cost tickets as required by the system. Many of the client's contracts are on a cost-plus basis.

5. The payroll clerk prepares a check to the same nonexistent person every week when he enters payroll transactions in the computer system, which also records the amount in the payroll journal. He submits it along with all other payroll checks for signature. When the checks are returned to him for distribution, he takes the check and deposits it in a special bank account bearing that person's name.

6. In withholding payroll taxes from employees, the computer operator deducts $3.50 extra federal income taxes from several employees each week and credits the amount to his own employee earnings record.

7. The payroll clerk manually prepares payroll checks but often forgets to record one or two checks in the computer-prepared payroll journal.

Substantive audit procedures

H. Compare total hours worked from payroll journal or listing to total hours worked as recorded on job cost tickets. I. Observe employees punching in only one card per employee to see whether any employee punches two cards (normally not an effective or practical audit procedure). J. Perform payroll payoff, requiring identification from all employees prior to payment. K. Recompute federal withholding taxes and trace to employee earnings record. L. Recompute state withholding taxes and trace to employee earnings record. M. Reconcile the disbursements in the payroll journal or listing to the disbursements on the payroll bank statement. N. Trace labor distribution to supporting job input forms.