Question 1

Which of the following would have the least amount of importance regarding controls over the processing of payroll?
A) The person authorized to sign paychecks should not be otherwise involved in the preparation of the payroll.
B) A check-signing machine should not be used to replace a manual signature.
C) Distribution of pay checks should be performed by someone who is not involved in the other payroll functions.
D) Unclaimed paychecks should be immediately returned for redeposit.

Accepted Answer

The use of a check-signing machine, as opposed to manual signatures, is more about efficiency and does not inherently compromise controls over payroll processing. The other options (A, C, D) directly relate to segregation of duties and safeguarding assets, which are fundamental to effective payroll controls.

Question 2

The human resources department is not considered to be an independent source for the internal verification of wage information.

Accepted Answer

The human resources department is considered to be an internal source for the verification of wage information.

Question 3

Which of the following statements is false?
A) The payroll cycle consists of one class of transactions.
B) Balance sheet accounts related to payroll are generally more significant than related transactions.
C) Internal controls over payroll are effective for most companies.
D) Small companies usually have effective controls over payroll.

Accepted Answer

Balance sheet accounts related to payroll, such as accrued liabilities, are generally less significant than the payroll transactions themselves, which involve regular payments and are subject to more frequent errors and fraud risks.

Question 4

Which of the following best describes the systems of internal control for payroll for large companies?
A) loosely structured but well controlled
B) loosely structured and loosely controlled
C) highly structured and well controlled
D) highly structured but loosely controlled

Accepted Answer

Large companies typically have complex payroll systems that require a high level of structure in order to maintain accuracy and control. Additionally, these companies are likely to have internal controls in place to ensure that payroll is processed correctly and that fraudulent activities are prevented. Therefore, the payroll systems of large companies are typically highly structured and well controlled.

Question 5

Paying employees for their services ends the payroll and personnel cycle.

Accepted Answer

Paying employees for their services is the final step in the payroll and personnel cycle, as it marks the completion of the process of compensating employees for their work.

Question 6

What events initiate and terminate the payroll and personnel cycle?

Accepted Answer

The answer of What events initiate and terminate the payroll...

Question 7

Discuss each of the following primary documents and records used in the personnel and employment function in the payroll and personnel cycle: human resource records, deduction authorization form, and the rate authorization form.

Accepted Answer

The answer of Discuss each of the following primary documents...

Question 8

Imprest accounts usually carry a significant balance.

Accepted Answer

Imprest accounts, such as petty cash funds, are designed to hold a small, fixed amount of money for minor, routine expenses, not significant balances.

Question 9

The job time ticket indicates the starting and stopping times of work during the pay period.

Accepted Answer

The answer of The job time ticket indicates the starting...

Question 10

State the purpose and the information contained on the W-2 Form and on the payroll tax returns.

Accepted Answer

The answer of State the purpose and the information contained...

Question 11

Auditors must understand the business functions and documents and record for the payroll and personnel cycle before they can assess control risk and design test of controls and substantive tests of transactions.

Accepted Answer

This statement is true. Auditors need to have a thorough understanding of the processes and paperwork involved in the payroll and personnel cycle in order to properly evaluate control risk and determine appropriate testing procedures.

Question 12

An impress payroll account is a separate payroll bank account in which a large cash balance is maintained.

Accepted Answer

An impress payroll account is a separate payroll bank account into which an employer deposits an exact amount of payroll funds for each pay period, rather than maintaining a large cash balance.

Question 13

Although some time records may be in paper form, most are electronically generated - for example, employees may enter time worked into online systems, apps and other IT-based payroll systems.

Accepted Answer

Most time records are electronically generated.

Question 14

When the auditor compares the cancelled check or direct deposit with the payroll journal for amount, they are concerned with the transaction-related audit objective of
A) occurrence.
B) accuracy.
C) classification.
D) timing.

Accepted Answer

The comparison of the cancelled check or direct deposit with the payroll journal for amount is done to ensure that the amount paid to employees is accurate. Therefore, it relates to the audit objective of accuracy.

Question 15

Discuss each of the following documents and records used in the timekeeping and payroll preparation function in the payroll and personnel cycle: time record, job time ticket, payroll transaction file, payroll journal and payroll master file.

Accepted Answer

The answer of Discuss each of the following documents and...

Question 16

The human resources department is considered to be an independent source for interviewing and hiring qualified personnel to work for a company.

Accepted Answer

The human resources department is responsible for recruiting, screening, and hiring candidates based on the company's needs and job requirements. As an independent source, they are not influenced by other departments or individuals within the company and are able to ensure the selection of qualified personnel based on merit and job-related criteria.

Question 17

An imprest payroll account limits the client's exposure to payroll fraud.

Accepted Answer

An imprest payroll account is a bank account established by employers for the purpose of covering payroll checks. This account is funded only with the exact amount needed to cover payroll expenses. Since imprest payroll accounts have a limited balance and require proper documentation for payroll disbursements, it reduces the risk of payroll fraud, making the statement true.

Question 18

The deduction authorization form authorizes the rate of pay and the deductions for taxes, dues, etc.

Accepted Answer

The deduction authorization form specifically authorizes deductions from an employee's paycheck for things like taxes, dues, or other withholdings, but it does not authorize the rate of pay. The rate of pay is determined by other agreements or contracts.

Question 19

An auditor is vouching a sample of hourly employees from the payroll master file to approved time clock or time sheet data in order to provide evidence that
A) employees work the number of hours for which they are paid.
B) payments are made at the contractual rate.
C) product cost information is accurate.
D) segregation of duties is present between the payroll function and the payment function for cash disbursements.

Accepted Answer

Vouching a sample of hourly employees from the payroll master file to approved time clock or time sheet data is done to provide evidence that employees work the number of hours for which they are paid. This is to ensure that the payroll is accurately reflecting the time worked by the employees and that payments are made accordingly. B, C, and D are not relevant to this specific audit procedure.

Question 20

Which of the following types of audit tests is usually emphasized due to a lack of independent third-party evidence related to payroll transactions?
A) analytical procedures
B) tests of details of balances
C) tests of controls
D) Each of the above is emphasized.

Accepted Answer

The answer of Which of the following types of audit...

Quiz 20: Audit of the Payroll and Personnel Cycle

Which of the following would have the least amount of importance regarding controls over the processing of payroll?