Question 1

When auditing the human resources and payroll cycle,the auditor should verify the officers' compensation because
A)officers are more likely to commit fraud.
B)officers' compensation is likely more prone to error.
C)some officers may have complex compensation packages.
D)some officers may be in a position to pay themselves more than the authorized amounts.

Accepted Answer

The auditor should verify officers' compensation because some officers may be in a position to pay themselves more than the authorized amounts. This is a potential fraud risk and could result in material misstatements in the financial statements. Additionally, officers may have complex compensation packages that require thorough testing to ensure accuracy.

Question 2

List the common key controls for the human resources and payroll cycle.

Accepted Answer

The answer of List the common key controls for the...

Question 3

When the employees are paid automatically by bank deposits to the employees' accounts,in an effort to identify potential fraud,the auditor can look for
A)duplicated bank account numbers.
B)duplicated names in the master payroll files.
C)unusual employee names.
D)cancelled cheques.

Accepted Answer

Duplicated bank account numbers can indicate that multiple payments are being made to the same account, which could be a sign of payroll fraud.

Question 4

Because of the lack of available evidence,it is usually difficult for an auditor to discover if an employee records more time on his or her time card than they actually worked.One procedure is to reconcile the total hours
A)paid this period with a previous period.
B)paid according to the payroll records with an independent record of the total hours worked,such as those maintained by production control.
C)worked this period with a previous period.
D)worked according to the summary payroll report with the total hours worked as recorded on the time card for the period.

Accepted Answer

Reconciling the total hours paid according to the payroll records with an independent record of the total hours worked, such as those maintained by production control, is the best choice. This helps to identify any discrepancies between the employee's reported hours and the actual hours worked, thus ensuring that the employee is not overpaid for time not worked. Comparing current payroll records with previous periods does not necessarily reveal discrepancies in timekeeping, while comparing current and previous hours worked may not be accurate if the employee's schedule or workload has changed. Similarly, comparing the summary payroll report with time card records may not detect discrepancies if the employee has manipulated the time card. Reconciling total hours paid with an independent record is the most effective method to detect possible fraudulent reporting of hours worked on a time card.

Question 5

A form issued for each employee summarizing the earnings record for the calendar year is the
A)rate authorization form.
B)summary payroll report.
C)payroll master file.
D)T4 form.

Accepted Answer

A T4 form is a Canadian tax form issued to employees by their employers, summarizing the employee's earnings record for the calendar year. It includes information about income tax withheld, contributions to the Canada Pension Plan and employment insurance, and other earnings such as vacation pay or tips. Therefore, option D is the correct answer. The other options (A, B, and C) are not related to the earnings record or the issuance of tax forms to employees.

Question 6

The auditor's primary concern in testing payroll liabilities is to make sure that
A)expense has not been overstated,thus reducing profits.
B)there are no understated or omitted accruals.
C)employees' T4 slips are accurate.
D)salaries of officers have not been misclassified as wages.

Accepted Answer

The auditor's primary concern in testing payroll liabilities is to ensure that there are no understated or omitted accruals. This means that all payroll-related expenses and liabilities have been recorded accurately and completely. This is important for both financial reporting and compliance purposes. While the other options may also be important, they are not the primary concern when it comes to testing payroll liabilities.

Question 7

In auditing the imprest payroll account,which of the following procedures will take the least amount of auditor time?
A)tests of controls
B)risk analysis and obtaining an understanding of controls
C)analytical procedures
D)tests of details of balances

Accepted Answer

The answer of In auditing the imprest payroll account,which of...

Question 8

The correct cutoff and valuation of accrued salaries and wages
A)is to calculate the exact hours of pay that were earned in the current period and paid in a subsequent period.
B)is to compute an approximate proportion of the wages that were earned in the current period and use that amount as the accrual.
C)allows the client to choose between A and B (above)each year.
D)depends on company policy and whether it is consistently followed.

Accepted Answer

The correct cutoff and valuation of accrued salaries and wages depend on the company policy and whether it is consistently followed. Therefore, the best choice is D. The company should have a set policy on how to calculate and value accrued salaries and wages, and should consistently follow it to ensure accurate financial statements. The policy may be based on factors such as hours worked, pay rates, and the timing of payments. Consistency is important to ensure comparability of financial statements from year to year.

Question 9

Verification of the legitimacy of year-end unpaid bonuses to officers and employees can be accomplished by comparing the recorded accrual to the amount
A)in the expense account.
B)used in the prior period.
C)authorized and recorded in the minutes of the board of directors.
D)paid in the subsequent period.

Accepted Answer

Verification of the legitimacy of year-end unpaid bonuses involves ensuring that the accrual aligns with the company's formal decisions. This is best accomplished by comparing the recorded accrual to the amount authorized and recorded in the minutes of the board of directors, as these minutes officially document the company's decisions regarding bonuses.

Question 10

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?
A)authorizing overtime hours
B)authorizing the addition or removal of employees from the payroll
C)distributing paycheques
D)collecting and retaining unpaid paycheques

Accepted Answer

Authorizing the addition or removal of employees from the payroll helps to ensure that only legitimate employees are getting paid, reducing the risk of payroll fraud. Authrorizing overtime hours (A) can also impact payroll fraud, but may not be as effective. Distributing paycheques (C) and collecting and retaining unpaid paycheques (D) are administrative tasks related to payroll but do not directly address the risk of fraud.

Question 11

An important consideration in evaluating the fairness of the amounts accrued for vacation pay,sick pay,and other benefits is the
A)consistent accrual of these liabilities relative to those of the preceding year.
B)actual expense incurred for the prior period.
C)amount expended to date in the current period.
D)profitability of the client,which will enable these liabilities to be met.

Accepted Answer

The consistent accrual of vacation pay, sick pay, and other benefits relative to those of the preceding year provides a basis for evaluating the fairness of the amounts accrued. This ensures that the company is consistently recognizing and recording these liabilities in a fair and accurate manner over time, which can help prevent manipulation or misstatement of financial statements. Option B, C, and D are not relevant in determining the fairness of the accrued amounts as they do not provide a basis for evaluating the consistency or accuracy of the accruals.

Question 12

State the six specific transactions-related audit objectives as related to payroll,and for each objective,state one common test of controls that can be used to test the objective.

Accepted Answer

The answer of State the six specific transactions-related audit objectives...

Question 13

Once the auditor has determined the company's policy for accruing wages and knows it is consistent with that of previous years,the appropriate audit procedure to test for cutoff and accuracy is to
A)recalculate the client's accruals.
B)compare the ledger balance with the journal and the T4 form.
C)confirm the amount with employees.
D)compare the recorded accrued wages with the amount approved in the minutes of the Board.

Accepted Answer

Recalculating the client's accruals is the appropriate audit procedure to test for cutoff and accuracy because it allows the auditor to verify that the accruals have been calculated correctly according to the company's policy and are accurately reflected in the financial statements.

Question 14

List examples of substantive test of details of balances for the accrued commission,accrued salaries and wages,and accrued bonuses accounts within the human resources and payroll cycle.

Accepted Answer

The answer of List examples of substantive test of details...

Quiz 15: Audit of the Human Resources and Payroll Cycle

When auditing the human resources and payroll cycle,the auditor should verify the officers' compensation because

List the common key controls for the human resources and payroll cycle.

When the employees are paid automatically by bank deposits to the employees' accounts,in an effort to identify potential fraud,the auditor can look for

Because of the lack of available evidence,it is usually difficult for an auditor to discover if an employee records more time on his or her time card than they actually worked.One procedure is to reconcile the total hours

A form issued for each employee summarizing the earnings record for the calendar year is the

The auditor's primary concern in testing payroll liabilities is to make sure that

In auditing the imprest payroll account,which of the following procedures will take the least amount of auditor time?

The correct cutoff and valuation of accrued salaries and wages

Verification of the legitimacy of year-end unpaid bonuses to officers and employees can be accomplished by comparing the recorded accrual to the amount

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?

An important consideration in evaluating the fairness of the amounts accrued for vacation pay,sick pay,and other benefits is the

State the six specific transactions-related audit objectives as related to payroll,and for each objective,state one common test of controls that can be used to test the objective.

Once the auditor has determined the company's policy for accruing wages and knows it is consistent with that of previous years,the appropriate audit procedure to test for cutoff and accuracy is to

List examples of substantive test of details of balances for the accrued commission,accrued salaries and wages,and accrued bonuses accounts within the human resources and payroll cycle.