cpa review ch7 review 4
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Matthews Corp. has changed from a system of recording time worked on time clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computer system automatically updates all payroll records. Because of this change
Part of the audit trail is altered.
In a manual payroll system, a paper trail of documents would be created to provide audit evidence that controls over each step in processing were operating effectively. One element of a computer system that differentiates it from a manual system is that a transaction trail useful for auditing purposes might exist only for a brief time or only in computer-readable form.
What would be the most effective control in assuring that the proper custody of assets in the investing cycle is maintained?
The recorded balances in the investment subsidiary ledger are periodically compared with the contents of the safe deposit box by independent personnel.
Custody of securities should be segregated from the accounting responsibility. Ideally, the CFO should have custody of investment securities, accounting should maintain the related records (establish accountability), and, periodically, assets should be independently reconciled with the records.
Which internal control activities are usually performed in the vouchers payable department?
Approving vouchers for payment by having an authorized employee sign the vouchers.
Matching the vendor’s invoice with the related receiving report.
Indicating the asset and expense accounts to be debited.
Before sending or receiving EDI messages, a company should
Execute a trading partner agreement with each of its customers and suppliers.
Before sending or receiving EDI messages, a company should execute a trading partner agreement with its customers and suppliers. For example, all parties should understand (1) their responsibilities, (2) the messages each will initiate, (3) how they will interpret messages, (4) the means of authenticating and verifying the completeness and accuracy of messages, (5) the moment when the contract between the parties is effective, and (6) the required level of security.
In a review of an EDI application using a third-party service provider, the auditor should
Determine whether an independent review of the service provider’s operation has been conducted
Verify that the service provider’s contracts include necessary clauses, such as the right to audit
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