20-17 (Objective 20-3)
The following questions concern internal controls in the payroll and personnel cycle. Choose the best response.
a. A factory foreman at Steblecki Corporation discharged an hourly worker but did not notify the human resources department. The foreman then forged the worker’s signature on time cards and work tickets and, when giving out the checks, diverted the payroll checks drawn from the discharged worker to his own use. The most effective procedure for preventing this activity is to
b. An auditor found that employee time records in one department are not properly approved by the supervisor. Which of the following could result?
c. The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the
20-20 (Objectives 20-2, 20-3)
Following are some of the tests of controls and substantive tests of transactions procedures often performed in the payroll and personnel cycle. (Each procedure is to be done on a sample basis.)
21-17 (Objective 21-1)
The following questions concern internal controls in the inventory and warehousing cycle. Choose the best response.
a. Which of the following controls will most likely justify a reduced assessed level of control risk for the occurrence assertion for purchases of inventory?
b. For control purposes, the quantities of materials ordered may be omitted from the copy of the purchase order that is
c. Which of the following procedures will best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?
21-18 (Objectives 21-1, 21-3)
The following questions concern testing the client’s internal controls for inventory and warehousing. Choose the best response.
a. When an auditor tests a client’s cost accounting records, the auditor’s tests are primarily designed to determine that
b. The accuracy of perpetual inventory master files may be established, in part, by comparing perpetual inventory records with
c. Which of the following sets of duties related to inventory and warehousing causes the greatest concern about inadequate segregation of duties?
21-19 (Objectives 21-1, 21-4, 21-5, 21-6)
The following questions deal with tests of details of balances and analytical procedures for inventory. Choose the best response.
a. Which of the following procedures is the auditor least likely to perform on the actual date the physical inventory count is observed?
b. An inventory turnover analysis is useful to the auditor because it may detect
c. A CPA auditing inventory may appropriately apply attributes sampling to estimate the
21-20 (Objectives 21-1, 21-3, 21-5, 21-6, 21-7)
Items 1 through 8 are selected questions typically found in questionnaires used by auditors to obtain an understanding of internal control in the inventory and warehousing cycle. In using the questionnaire for a client, a “yes” response to a question indicates a possible internal control, whereas a “no” indicates a potential deficiency.
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