astings Manufacturing Company makes special-order equipment to be used by other manufacturers.The…
astings Manufacturing Company makes special-order equipment to be used by other manufacturers.The company has three major product lines and approximately 10 variations of each product line.The company uses a job cost accounting system in which all labor and materials are directly charged to the cost of building each stamping machine. (Each machine retails, on average, for about $500,000.)
All direct-labor hours are captured by automated time-capture machines when each employee punches in the job order number and the start and finish times worked on the job each day.All raw materials are also assigned the same job order number and are entered into the system based on work-order requisitions received by inventory control.
a. Identify the controls the company should implement to ensure that only authorized employees are paid, that they are paid at the authorized rate for hours actually worked, and that the labor cost is recorded to the correct job.
b. Develop an audit program to test the labor part of the system identified in part (a).