If control risk is assessed very low, the inventory valuation substantive tests can be limited in scope and overall analytical procedures can be used with more confidence in being able to detect material misstatements not otherwise evident in the accounting details.
True
False
True
The physical output of a production cycle is payroll.
True
False
False
Only supervisors have physical custody of materials, equipment and labour while the production work is performed
True
False
False
The biggest obstacle to implementing JIT is the excessive cost of implementation.
True
False
False
Most of the "transactions" in a production cycle are cost accounting allocations, unit cost determinations, and standard cost calculations.
True
False
True
bill of materials:
a specification of the materials authorized for production; the source of authorization for the preparation of materials requisitions.
detail test of control procedure:
consists of (1) identification of the data population from which a sample of items will be selected for audit and (2) an expression of the action that will be taken to produce relevant evidence. In general, the actions in detail test of control audit procedures involve vouching, tracing, observing, scanning and recalculating.
materials requisitions:
requests that create authorizations for the inventory custodian to release raw materials and supplies to the production personnel; documents that are the inventory recordkeepers' authorizations to update the raw materials inventory files to record reductions of the raw materials inventory.
paper trail:
set of telltale signs of erroneous accounting, missing or altered documents or a "dangling debit" (the false or erroneous debit that results from an overstatement of assets).
payroll accounting:
preparation of individual paycheques, pay envelopes or electronic transfers using rate and deduction information supplied by the personnel function and base data supplied by the timekeeping-supervision functions.
payroll distribution:
(as an employer's procedure) control of the delivery of pay to employees so that unclaimed cheques, cash or incomplete electronic transfers are not returned to persons involved in any of the other payroll functions.
personnel or labour relations department:
function having transaction initiation authority to add new employees to the payroll, delete terminated employees, obtain authorizations for deductions (such as insurance, saving bonds and withholding tax exemptions on federal forms) and transmit authority for pay rate changes to the payroll department.
production orders:
internal documents that specify the materials and labour required and the timing for the start and end of production.
sales forecast:
estimated future sales.
supervision:
(in payroll processing) authorization of all pay base data (hours, job number, absences, time off allowed for emergencies, etc.) by an employee's immediate supervisor.
test of controls:
ordinary and extended procedures designed to produce evidence about the effectiveness of client controls that should be in operation.
timekeeping:
payroll function of producing time cards or time sheets that provide the basis for payment to hourly workers.
