Question 1

Proper segregation of duties for the production process,says those with custody of inventories should not

Accepted Answer

A) Request new materials or complete production reports. 
B) Punch time cards or fill out quality control reports 
C) Authorize production,perform cost accounting recordkeeping,or prepare cost analyses. 
D) Produce finished units or transfer raw materials into production 
A) Request new materials or complete production reports. 
B) Punch time cards or fill out quality control reports 
C) Authorize production,perform cost accounting recordkeeping,or prepare cost analyses. 
D) Produce finished units or transfer raw materials into production

Question 2

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.

Accepted Answer

A) examining authorization forms for new employees 
B) authorizing payroll rate changes for all employees 
C) comparing payroll registers with original batch transmittal data 
D) hiring all subordinate payroll department employees 
A) examining authorization forms for new employees 
B) authorizing payroll rate changes for all employees 
C) comparing payroll registers with original batch transmittal data 
D) hiring all subordinate payroll department employees

Question 3

It is permissible for accounting personnel to authorize production orders since they do not have custody of the assets.

Accepted Answer

A) True 
 B)False

Question 4

If controls over production accounting are found to be strong,an auditor can plan to do less testing over ________.

Accepted Answer

A) the existence assertion of inventory 
B) the valuation assertion of inventory 
C) the completeness assertion of inventory 
D) the rights assertion over inventory 
A) the existence assertion of inventory 
B) the valuation assertion of inventory 
C) the completeness assertion of inventory 
D) the rights assertion over inventory

Question 5

A payroll "clearing account" is a temporary account that holds payroll transactions until final accounting entries are prepared.

Accepted Answer

A) True 
 B)False

Question 6

Selecting a sample of payroll summaries and vouching the details to time records is a procedure designed to test the control objective of ________.

Accepted Answer

A) environment 
B) validity 
C) completeness 
D) classification 
A) environment 
B) validity 
C) completeness 
D) classification

Question 7

Overall production authorization starts with production planning,which usually is based on a sales forecast.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following accounts is not considered in the production cycle?

Accepted Answer

A) Inventory. 
B) Cost of goods sold. 
C) Amortization expense. 
D) Sales. 
A) Inventory. 
B) Cost of goods sold. 
C) Amortization expense. 
D) Sales.

Question 9

Selecting a sample of time clock cards and examining them for evidence of approval by a supervisor then tracing the hours recorded to the payroll registers is a procedure designed to obtain evidence about the control objective(s)of ________.

Accepted Answer

A) validity only 
B) authorization only 
C) completeness only 
D) authorization and completeness. 
A) validity only 
B) authorization only 
C) completeness only 
D) authorization and completeness.

Question 10

In the audit of payroll,auditors often examine the endorsements on a sample of cancelled payroll cheques.What is the purpose of this procedure?

Accepted Answer

The auditor is looking for indications t

Question 11

A materials requisition is the document that authorizes the inventory custodian to release raw materials and supplies to production personnel.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following documents is NOT included in the payroll cycle?

Accepted Answer

A) payroll cheques 
B) timekeeping records 
C) termination notices 
D) supplier invoices 
A) payroll cheques 
B) timekeeping records 
C) termination notices 
D) supplier invoices

Question 13

Which of the following is most likely to approve changes in pay rates and deductions from employee salaries?

Accepted Answer

A) Personnel department. 
B) Treasurer. 
C) Controller. 
D) Payroll department. 
A) Personnel department. 
B) Treasurer. 
C) Controller. 
D) Payroll department.

Question 14

Why is control over custody of work-in-process (WIP)inventory is more difficult than control over finished goods or raw materials? How can proper control over custody of WIP be achieved?

Accepted Answer

Once requisitioned into production,raw m

Question 15

Select significant items from the raw materials inventory list and agree costs to suppliers' invoice,shipping charges,and customs broker's charges,is substantive test for which assertions?

Accepted Answer

A) Valuation and presentation 
B) Existence and presentation 
C) Completeness and ownership 
D) Valuation and ownership 
A) Valuation and presentation 
B) Existence and presentation 
C) Completeness and ownership 
D) Valuation and ownership

Question 16

The accounting department at Blue Manufacturing Limited receives production information at the end of each week.The production floor supervisor reports time and production data and the payroll department reports labour cost data.How will the accounting department use this information? Why?

Accepted Answer

The accounting department is receiving d

Question 17

Which of the following is NOT a major risk in the payroll cycle?

Accepted Answer

A) Paying fictitious employees. 
B) Paying employees more than a market wage. 
C) Overpayment for time or production. 
D) Incorrect accounting for costs and expenses. 
A) Paying fictitious employees. 
B) Paying employees more than a market wage. 
C) Overpayment for time or production. 
D) Incorrect accounting for costs and expenses.

Question 18

What is the major control risk for the payroll payment process?

Accepted Answer

A) Potential overpayment of wages due to employee fraud. 
B) Potential theft of cash. 
C) Potential overpayment of employee deductions. 
D) Potential underpayment due to employee fraud. 
A) Potential overpayment of wages due to employee fraud. 
B) Potential theft of cash. 
C) Potential overpayment of employee deductions. 
D) Potential underpayment due to employee fraud.

Question 19

Small Corporation uses a Wages Clearing Account for its payroll disbursements.At the end of February,a reasonably large debit balance remained in this account.What is the most likely reason?

Accepted Answer

A) More labour cost had been assigned to the expense accounts than had been paid. 
B) Some labour cost had not been properly classified in the expense accounts. 
C) Some employees had not yet cashed their cheques. 
D) Not enough cash had been transferred to the bank account. 
A) More labour cost had been assigned to the expense accounts than had been paid. 
B) Some labour cost had not been properly classified in the expense accounts. 
C) Some employees had not yet cashed their cheques. 
D) Not enough cash had been transferred to the bank account.

Question 20

A test of the validity objective is to examine a sample of production cost reports and recalculate all costs entered.

Accepted Answer

A) True 
 B)False

Exam 13: Payroll and Production Processes

Proper segregation of duties for the production process,says those with custody of inventories should not

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.

It is permissible for accounting personnel to authorize production orders since they do not have custody of the assets.

If controls over production accounting are found to be strong,an auditor can plan to do less testing over ________.

A payroll "clearing account" is a temporary account that holds payroll transactions until final accounting entries are prepared.

Selecting a sample of payroll summaries and vouching the details to time records is a procedure designed to test the control objective of ________.

Overall production authorization starts with production planning,which usually is based on a sales forecast.

Which of the following accounts is not considered in the production cycle?

Selecting a sample of time clock cards and examining them for evidence of approval by a supervisor then tracing the hours recorded to the payroll registers is a procedure designed to obtain evidence about the control objective(s)of ________.

In the audit of payroll,auditors often examine the endorsements on a sample of cancelled payroll cheques.What is the purpose of this procedure?

A materials requisition is the document that authorizes the inventory custodian to release raw materials and supplies to production personnel.

Which of the following documents is NOT included in the payroll cycle?

Which of the following is most likely to approve changes in pay rates and deductions from employee salaries?

Why is control over custody of work-in-process (WIP)inventory is more difficult than control over finished goods or raw materials? How can proper control over custody of WIP be achieved?

Select significant items from the raw materials inventory list and agree costs to suppliers' invoice,shipping charges,and customs broker's charges,is substantive test for which assertions?

The accounting department at Blue Manufacturing Limited receives production information at the end of each week.The production floor supervisor reports time and production data and the payroll department reports labour cost data.How will the accounting department use this information? Why?

Which of the following is NOT a major risk in the payroll cycle?

What is the major control risk for the payroll payment process?

Small Corporation uses a Wages Clearing Account for its payroll disbursements.At the end of February,a reasonably large debit balance remained in this account.What is the most likely reason?

A test of the validity objective is to examine a sample of production cost reports and recalculate all costs entered.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, receivables, and Receipts Process and Cash Account Balance

The Purchases, payables, and Payments Process

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

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