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  • Problem (Objective 20-5) Alyssa Ghose Is Auditing Payroll Accruals For A Manufacturing Company. The Client

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    Nana Banana
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    Alyssa Ghose is auditing accruals for payroll taxes, vacation pay, and sales bonuses. She compared accrual balances to prior years and traced subsequent tax payments and vacation checks. However, she did not examine policies for accruals or recompute samples. Additional procedures would include examining circumstances affecting accruals, verifying tax forms, recomputing bonuses and vacation accruals, and reviewing accrual policies to fully test accuracy and completeness.

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    Alyssa Ghose is auditing accruals for payroll taxes, vacation pay, and sales bonuses. She compared accrual balances to prior years and traced subsequent tax payments and vacation checks. However, she did not examine policies for accruals or recompute samples. Additional procedures would include examining circumstances affecting accruals, verifying tax forms, recomputing bonuses and vacation accruals, and reviewing accrual policies to fully test accuracy and completeness.

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    279 views2 pages

    Problem (Objective 20-5) Alyssa Ghose Is Auditing Payroll Accruals For A Manufacturing Company. The Client

    Uploaded by

    Nana Banana
    Alyssa Ghose is auditing accruals for payroll taxes, vacation pay, and sales bonuses. She compared accrual balances to prior years and traced subsequent tax payments and vacation checks. However, she did not examine policies for accruals or recompute samples. Additional procedures would include examining circumstances affecting accruals, verifying tax forms, recomputing bonuses and vacation accruals, and reviewing accrual policies to fully test accuracy and completeness.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 2

    Problem

    (Objective 20-5) Alyssa Ghose is auditing payroll accruals for a manufacturing company. The client
    has accrued payroll taxes, accrued vacation pay, and accrued bonuses for salespersons as of the end
    of the fiscal year. Alyssa performed the following audit procedures.

    1. Compared all accrual balances in the current year to the prior year and noted no significant
    fluctuations.

    2. Traced the subsequent payment of payroll taxes to the cash disbursements journal and the bank
    statement.

    3. Reviewed a sample of contracts with salespersons to verify the bonus formula.

    4. Reviewed cancelled checks for a sample of checks disbursed after year end for unused vacation
    pay.

    a. Are the audit procedures performed by Alyssa sufficient to test accrued payroll tax, vacation pay,
    and bonuses? If not, what additional procedures should she perform?

    b. For each additional procedure you recommend in part a., identify the related audit objective the
    procedure would satisfy.

    Design and perform analytical procedures for the payroll and personnel cycle.

    Objective 20-5

    Design and perform tests of details of balances for accounts in the payroll and personnel cycle.

    Step-by-step solution

    1. Step 1 of 2

    a.

    Here, company policy regarding payroll computing and recording vacation pay accrual, payroll tax
    examination, and accrued bonus did not examined properly. Thus, the audit procedures performed
    by the auditor is not appropriate.

    Comment

    2. Step 2 of 2

    b.

    The following table shows the additional procedures for each of procedures to be followed by the
    auditors, and related audit objective:

    This study source was downloaded by 100000802062280 from CourseHero.com on 01-03-2022 18:34:52 GMT -06:00

    https://www.coursehero.com/file/75319772/20-26docx/
    Additional Procedures Audit Objective

    Completeness that might suggest


    1 Consider changes in client circumstances. fluctuations in accrual balances, such as
    increase in number of employees

    Examine payroll tax form filed in Trace amount of accrual to cash


    2 subsequent period to verify amount of disbursements in subsequent period.
    payroll tax. Completeness Accuracy

    For a sample of salespersons, recompute


    Compare the bonus formula with prior
    3 the accrued bonus based on the formula
    years (Accrual)
    as stated in the contract.

    For a sample of employees, recompute


    Review company policy for computing and
    4 accrued vacation pay based on company
    recording vacation pay accrual.
    policy. Completeness, Accuracy.

    Comment

    This study source was downloaded by 100000802062280 from CourseHero.com on 01-03-2022 18:34:52 GMT -06:00

    https://www.coursehero.com/file/75319772/20-26docx/
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