When reviewing the audit working papers of Coffee Ltd you find the following audit populations were used as the basis from which to select a random sample in response to an account balance, assertion at risk and an appropriate audit procedure.Which of these populations would be of most concern to you as being an inappropriate audit population, given the assertion at risk and the audit procedure selected?
A)Completeness of payroll-population from which sample was selected was payroll recorded in the payroll file, and the procedure was to ensure that the hours worked were matched with the details contained on the employee's time sheet.
B)Accuracy of pay rates-population from which sample was selected was approved payroll, and the procedure was to test back to authorised pay rates.
C)Completeness of purchases-population from which sample was selected was goods received notes, and the procedure was to trace purchases to inventory records.
D)Accuracy of purchases-population from which sample was selected was all purchases recorded, and the procedure was to check the purchase prices on the items selected and trace back to suppliers' invoices.

Question

Quizplus · Accepted Answer

Using the payroll file as the population for testing completeness of payroll is not appropriate, as it may not include all payroll transactions (e.g. cash payments or off-the-books payments). In addition, the procedure of matching hours worked with employee time sheets only tests the accuracy of the payroll, not completeness. A better population for testing completeness of payroll would be the general ledger accounting entries for payroll expenses.

When Reviewing the Audit Working Papers of Coffee Ltd You