Transaction Assertions: Production Cycle Flashcards
Name the Transaction Assertions
Occurrence Completeness Accuracy Cutoff Classification
Define Occurence
Production and related events that have been recorded have occurred and pertain to the entity.
Define Completeness
All production events that should have been recorded have been recorded
Define Accuracy
Production information including costs has been properly calculated and recorded
Define Cutoff
Production events have been recorded in the correct accounting period.
Define Classification
Classification-related events are recorded in the proper accounts.
What controls are relevant to Occurrence?
Cost accounting is separated from production, payroll and inventory control.
Material usage reports are reconciled with raw materials stores’ issue slips, scrap reports, and documentation of unused material returned to inventory.
What controls are relevant to Completeness?
All documents are prenumbered and numerical sequence reviewed.
Periodic count of inventory is compared to perpetual records.
Open production cost reports are reconciled to the WIP inventory cost report.
Receiving reports and material usage are posted to perpetual inventory records.
Job cost sheets are posted weekly, and summary journal entries of work in process and work completed are prepared monthly.
What controls are relevant to Accuracy?
Labor usage reports are compared to job time tickets.
Material usage and labor usage are prepared by floor supervisor and approved by production supervisor.
Periodic count of inventory is compared to perpetual records.
Receiving reports are posted to perpetual inventory on a timely basis.
What controls are relevant to Cutoff?
Receiving reports are posted to perpetual inventory in the proper period.
Finished goods are recorded in the proper period.
Production reports of material and labor are prepared weekly and transmitted to cost accounting.
What controls are relevant to Classification?
Production supervisor is required to account for all material and labor as direct or indirect and to identify appropriate job classifications.
What tests of controls are relevant to Occurrence?
Observe separation of cost accounting function from production, payroll and inventory control.
Inspect evidence of reconciliations.
What tests of controls are relevant to Completeness?
Inspect evidence of review of numerical sequence. Select a sample of documents and examine numerical sequence.
Inspect evidence that inventory counts are compared to perpetual records.
Inspect reconciliation of production cost reports to WIP inventory control report.
Trace receiving reports to perpetual inventory. Trace materials used reports to production cost reports.
Inspect journal entries and agree with approved cost sheets. Compare costs to standard cost listing.
What tests of controls are relevant to Accuracy?
Inspect evidence of comparison by client.
Inspect evidence of approval of material and labor usage reports.
Reconcile inventory counts with perpetual records.
Trace dates on receiving reports to posting in perpetual inventory records.
What tests of controls are relevant to Cutoff?
Vouch the dates of inventory records to receiving reports?
Inspect production data and agree with finished goods inventory status reports.
Inspect production reports and agree dates with dates in weekly journal entries.
