cpa audit review ch7 review 2

Is responsible for mailing the checks.

The person responsible for signing the checks also should be responsible for assuring that the checks are mailed. This precaution assures limited access to the checks once they are signed.

Negotiate terms with vendors.

To prevent or detect fraud or error in the performance of assigned responsibilities, duties are often segregated. Approving purchase orders and negotiating terms with vendors are part of the authorization process performed by the purchasing department.

Acknowledge all messages initiated externally with confirming messages.

If an entity acknowledges messages initiated externally, the alleged sender will have the opportunity to recognize that it had not sent the message and will then be able to notify the entity of the potential forgery. Then, corrective action can be taken.

Payroll register entry.

Determining whether payroll transactions occurred is an internal control objective of the human resources and payroll cycle. The payroll register records each payroll transaction for each employee. Thus, an entry in the payroll register is reconciled to time cards to test whether the recorded transaction actually occurred.

B.  Comparison of daily journal entries with factory labor summary.

Daily journal entries are made to record labor, materials, and overhead. Direct labor is posted from the daily factory labor summary. If the latter has been properly recorded, tracing the amounts to the journal entries will determine whether manufacturing overhead was incorrectly charged with direct rather than indirect labor.