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    16-38) In connection with an audit of the financial statements of Olympia Company, the auditors are reviewing procedures for accumulating direct labor-hours. They learn that all production is by job order and that all employees are paid hourly wages, with time and a half for overtime hours.
    Olympia's direct labor-hour input process for payroll and job-cost determination is summarized in the flowchart that is illustrated below. Steps A and C are performed in timekeeping, step B in the factory operating departments, step D in payroll audit and control, step E in data input, and step F in computer operation.

    Required: For each input processing step A through F:
    a. List the possible errors or discrepancies that may occur.
    b) Cite the corresponding control that should be in effect for each error or discrepancy.
    Note: Your discussion of Olympia's procedures should be limited to the input for direct labor hours, as shown in steps A through F in the flowchart. Do not discuss human resources procedures for hiring, promotion, termination, and pay-rate authorization. In step F do not discuss equipment, computer program, and general computer controls

    Text Book Problem:
    Principles of Auditing & Other Assurance Service, by Whittington/Pany (15e)
    Chapter 16 -> Auditing Operations and Completing the Audit

    See attached file for full problem description.

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    Solution Preview

    Incorrect recording of the number of hours from the Time Card;
    Incorrect entry of the materials required.
    ? The entries for the materials required are incorrectly entered.
    ? The entries for the recording of the number of hours are incorrectly entered.
    Payroll audit and control does not spot excessive requirements and use of material. ...

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