Question

Each of the following tests of controls could be performed during the audit of the controls in the production cycle.

Required:

For each procedure, identify (a) the internal control objective being tested and (b) the assertion(s) being addressed.

1. Balance and reconcile detailed production cost sheets to the work-in-process inventory control account.

   1. Objective:

   2. Addressed:

2. Scan closed production cost sheets for missing numbers in the sequence.

3. Vouch a sample of open and closed production cost sheet entries to (a) labor reports and (b) issue forms and materials used reports.

4. Locate the material issue forms and determine whether they are (a) prenumbered, (b) kept in a secure location, and (c) available to unauthorized persons.

5. Select several summary journal entries in the work-in-process inventory and (a) vouch them to weekly labor and material reports and to production cost sheets and (b) trace them to the control account.

6. Select a sample of the material issue forms in the production department file. Examine them for

   1. Issue date and materials used report date.

   2. Production order number.

   3. Floor supervisor's signature or initials.

   4. Name and number of material.

   5. Raw materials stores clerk's signature or initials.

   6. Material requisition in raw materials stores file, noting the date of requisition.

7. Determine by inquiry and inspection whether cost clerks review dates on reports of units completed for accounting in the proper period.

Answer 1

Answer.

(A). Internal Controls objectives being test in the given case:-

1. Cost Effectiveness

2. Reduction in Wastage

3. Determine the actual Profit

4. Determine Accountability & Resposibility

5. Maintain all Records Effectivily

(B) The Assertions being addressed are:-

While performing test of controls during the audit in the production cycle is specified the concerned person performing his work effectively & efficiently.

While checking in Internals Controls all the activities performing in the production process as per the required norms which given my the head of department.