Question

Hi, need a help with a series a short exercises. Thanks for the help

You are the staff auditor on an engagement and have performed the following audit procedures. Identify the transaction cycle being audited.

1. Select a sample of payroll checks of hourly employees and agree the hours to the employee time records.

Transaction Cycle:

2. Trace the auditor’s count of the inventory items in the warehouse to the final inventory count recorded by the client.

Transaction Cycle:

3. Select a sample of entries in the fixed assets acquisitions journal and trace each one to a related vendor’s invoice.

Transaction Cycle:

Answer 1

1. Select a sample of payroll checks of hourly employees and agree the hours to the employee time records. Transaction cycle is Payroll i.e. Employee cost area. This audit procedure was performed while auditing employee cost of the Company.

2. Trace the auditor’s count of the inventory items in the warehouse to the final inventory count recorded by the client. Transaction cycle -: Purchases/Inventory cycle. Physical verification of inventory is an very important procedure to ascertain existence of inventory.

3.   Select a sample of entries in the fixed assets acquisitions journal and trace each one to a related vendor’s invoice. Transaction cycle - Capital Assets/Fixed Asset. Testing of fixed assets additions is an important procedure in capital assets cycle.