Refer to the internal control questionnaire for the production cycle and assume that the answer to each question is “no” Prepare a table matching questions to errors of frauds that could occur because of the absence of the control. Your column headings should be as follows:

Question Possible Error or dues to weakness

1) Is cost accounting separate from production, payroll, and inventory control?

2) Is access to blank production order forms restricted to authorized persons?

3) Is access to blank bills of materials and labor requisitions restricted to authorized persons?

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

5) Are production orders prepared by authorized persons?

6) Are bills of materials and labor needs prepared by authorized persons?

7) Are material usage reports compared to job time tickets?

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

9) Are material requisitions and job time tickets reviewed by the production supervisor after the floor supervisor prepares them?

10) Are the weekly direct labor and materials used by the production supervisor after preparation by the floor supervisor?

Completeness

1) Are production orders prenumbered and the numerical sequence checked for missing documents?

2) Are bills of materials and labor need forms prenumbered and the numerical sequence checked for missing documents?
3) Are materials requisitions and job time tickets prenumbered and the numerical sequence checked for missing documents?

4) Are inventory issue forms prenumbered and the numerical sequence checked for missing documents?

5) Is an accounting notified of terms on purchases agreements

6) Is accounting notified of orders received on consignment?

Accuracy

1) Are the difference between inventory issue forms and materials used reports recorded and reported to the costs accounting supervisor?

2) Are differences between job time tickets and the labor report recorded and reported to the cost accounting supervisor?

3) Are standard costs used? If so, are they reviewed and revised periodically?

4) Are reports materials issued to production reconciled with finished goods reports?

Cutoff

1) Does the accounting manual give instructions to date entries on the date of use?

2) Does an accounting supervisor review monthly, quarterly, and year-end costs accruals?

Classification

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

2) Does the accounting manual give instructions for the proper classification of cost accounting transactions?

2.

Tests of controls related to control and assertions. Each of the following tests of controls could be performed during the audit of the controls in the production cycles.

For each procedure, identify ( a) the internal control activity (strength) being tested and (b) the assertions being addressed.

1. Balance and reconcile detailed production cost sheets to the work-in-process inventory control account.

2.Scan closed production cost sheets for missing numbers in the sequence.

3.Vouch for a sample of open and closed production cost sheet entries to (a) labor reports and(b) issue slips and materials-used reports.

4.Locate the material issue forms. Are they pre-numbered? kept in a secure location?

5.Select several summary journal entries in the work-in-process inventory

(a) vouch to weekly labor and material reports and to production cost sheets, and (b) trace to control account.

6.Select a sample of the material issue slips in the production department file. Examine for

the following:

a. Issue date/materials-used report date

b. Production order number

c. Supervisor's signature or initials

d. Name and number of material

e. Raw material stores clerk's signature or initials

f. Matching material requisition in raw material stores file, noting the date of requisition

7. Determine by inquiry and inspection whether cost clerks dates on reports of units completed for accounting in the proper period