Option #2: Tests of Controls: Processing and Output Controls Matt's Company's audit team is evaluating the internal controls that for the automated being processing of payroll transactions. The following controls have been identified as important in this processing as part of the understanding and assessment stages: a. A system log is generated and reviewed on a weekly basis to identify an unauthorized access to payroll programs and processing. The report shows programs accessed during the past week, the individual(s) who accessed those programs, and the time(s) the programs have been accessed. Any inconsistency is investigated immediately. b. Controls numbers are determined and then compared to the actuals following transaction processing. Jim's highest paid employee processed through the system earns $360,000 per year so . any gross pay calculations in excess of $30,000 per month are identified and written to a rejected transaction file for further investigation. d. An error/unusual report is generating through processing. The report is then reviewed investigation, and the solutions documented. e. To ensure payroll is properly authorized by the appropriate personnel, any changes to employee master file information are evaluated. f. The output is examined for rationality prior to distribution to users. Required: Inquiry, observation, document examination, and re-performance are all used to test the operating effectiveness of controls. Provide an example of how Jim's audit team could use each of the testing methods to test operating effective. Note: Not all methods are appropriate for all controls. Imagine that you will be presenting to your audit partner on how you will conduct the audit of this section of controls. Prepare the following deliverable: a. A Word document with your analysis of the case and controls. Option #2: Tests of Controls: Processing and Output Controls Matt's Company's audit team is evaluating the internal controls that for the automated being processing of payroll transactions. The following controls have been identified as important in this processing as part of the understanding and assessment stages: a. A system log is generated and reviewed on a weekly basis to identify an unauthorized access to payroll programs and processing. The report shows programs accessed during the past week, the individual(s) who accessed those programs, and the time(s) the programs have been accessed. Any inconsistency is investigated immediately. b. Controls numbers are determined and then compared to the actuals following transaction processing. Jim's highest paid employee processed through the system earns $360,000 per year so . any gross pay calculations in excess of $30,000 per month are identified and written to a rejected transaction file for further investigation. d. An error/unusual report is generating through processing. The report is then reviewed investigation, and the solutions documented. e. To ensure payroll is properly authorized by the appropriate personnel, any changes to employee master file information are evaluated. f. The output is examined for rationality prior to distribution to users. Required: Inquiry, observation, document examination, and re-performance are all used to test the operating effectiveness of controls. Provide an example of how Jim's audit team could use each of the testing methods to test operating effective. Note: Not all methods are appropriate for all controls. Imagine that you will be presenting to your audit partner on how you will conduct the audit of this section of controls. Prepare the following deliverable: a. A Word document with your analysis of the case and controls
