Question 1

Which of the following could test the assertion of classification for payroll-related liabilities?
A) Compare items in accrued payroll taxes to the supporting payroll tax return.
B) Search for unrecorded liabilities.
C) Examine payroll tax returns to determine that the expense was recorded in the proper period.
D) Review payroll liabilities for proper reporting as short- or long-term.

Accepted Answer

D

Question 2

Tests of details of transactions are often conducted in conjunction with tests of controls.

Accepted Answer

Tests of details of transactions are often conducted in conjunction with tests of controls in order to provide assurance that the controls are working effectively and accurately recording transactions.

Question 3

If the results of the control tests do not support the planned level of control risk,the detection risk will have to be set higher.

Accepted Answer

If the results of the control tests do not support the planned level of control risk, the auditor would lower the detection risk to achieve the desired level of audit risk, often by performing more substantive testing.

Question 4

Proper segregation of duties is critical for the human resource management process.

Accepted Answer

Proper segregation of duties helps to prevent fraud, errors, and abuse in the human resource management process. It ensures that no single individual has complete control over all aspects of the process, which reduces the risk of mistakes, intentional or unintentional. As a result, it increases the overall effectiveness of the human resource management process.

Question 5

An auditor vouched data for a sample of employees in a payroll register to approved clock card/time sheet data to provide assurance that
A) payments to employees are computed at authorized rates.
B) employees worked the number of hours for which they are paid.
C) segregation of duties exists between the preparation and distribution of the payroll.
D) internal controls relating to unclaimed payroll checks are operating effectively.

Accepted Answer

Vouching data from the payroll register to approved clock card or time sheet ensures that employees worked the number of hours for which they are paid. It provides assurance that the payroll computations are accurate and compliant with authorized rates. Segregation of duties and internal controls relating to unclaimed payroll checks are not directly related to vouching payroll data.

Question 6

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except:
A) payments to fictitious employees.
B) payments to terminated employees.
C) payments to valid employees who have not worked.
D) payments to valid employees at a rate in excess of the authorized amount.
AICPA: BB Industry
AICPA: FN Decision Making
Accessibility: Keyboard Navigation

Accepted Answer

The occurrence assertion for payroll transactions is concerned with ensuring that recorded transactions actually occurred. Payments to fictitious employees, terminated employees, or valid employees who have not worked all relate to transactions that may not have actually occurred. However, payments to valid employees at a rate in excess of the authorized amount relate to the accuracy or valuation assertion, not occurrence.

Question 7

Payroll-related expenses normally are not a material cost to the organization.

Accepted Answer

Payroll-related expenses can be a significant cost to an organization, comprising the salaries, wages, benefits, and taxes associated with employees. These expenses can significantly impact the financial statements and overall profitability of the organization.

Question 8

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?
A) Human resource.
B) Treasurer.
C) Controller.
D) Payroll.

Accepted Answer

The answer of Which of the following departments most likely...

Question 9

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?
A) Payroll transactions are properly disclosed.
B) Recorded payroll transactions are valid.
C) Payroll transactions are recorded in the appropriate time period.
D) All payroll transactions have been recorded.

Accepted Answer

The validity of payroll transactions is likely to be a larger concern in the audit of the payroll cycle because it ensures that all employees are paid correctly and in compliance with company policies and legal requirements. The other objectives listed (proper disclosure, appropriate timing of recording, and completeness of recording) are also important, but ensuring the validity of transactions is critical to the accuracy of the overall process.

Question 10

All of the following are incorporated into valuation models except:
A) the exercise price of the option.
B) the term of the option.
C) expected dividends.
D) current tax rates.
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation

Accepted Answer

Current tax rates are not incorporated into valuation models for options. The exercise price, term of the option, and expected dividends are all factors that affect the value of an option and would be incorporated into a valuation model.

Question 11

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

Accepted Answer

Inherent risk associated with officer compensation is high due to the potential risk of officers taking advantage of their high-ranking positions by setting their compensation at excessive levels.

Question 12

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

Accepted Answer

Employees complete a W-4 form to indicate their tax withholding preferences to their employer. A separate authorization form may be required for insurance deductions, but it is not part of the W-4 form.

Question 13

The payroll-processing function is responsible for paying employees for services and benefits.

Accepted Answer

The answer of The payroll-processing function is responsible for paying...

Question 14

Which of the following could test the assertion of cutoff for payroll-related liabilities?
A) Compare items in accrued payroll taxes to the supporting payroll tax return.
B) Search for unrecorded liabilities.
C) Examine payroll tax returns to determine that the expense was recorded in the proper period.
D) Review payroll liabilities for proper classification as short-or long-term.

Accepted Answer

The answer of Which of the following could test the...

Question 15

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?
A) There are significant unexplained variances between standard and actual labor cost.
B) Payroll checks are disbursed by the same employee each payday.
C) Employee time sheets are approved by individual departmental supervisors.
D) A separate payroll bank account is maintained on an imprest basis.

Accepted Answer

Significant unexplained variances between standard and actual labor cost could indicate that employees are manipulating their time sheets or receiving improper pay. This is a red flag for potential payroll fraud. Option B, C, and D do not necessarily indicate employee payroll fraud on their own.

Question 16

A surprise observation by an auditor of an entity's regular distribution of paychecks is primarily designed to satisfy the auditor that
A) all unclaimed payroll checks are properly returned to the cashier.
B) the paymaster is not involved in the distribution of payroll checks.
C) all employees have in their possession proper employee identification.
D) names on the company payroll are those of bona fide employees presently on the job.

Accepted Answer

A surprise observation of the regular distribution of paychecks is primarily designed to satisfy the auditor that the names on the company payroll are those of bona fide employees presently on the job. This helps to ensure that there are no fictitious employees on the payroll, which could result in unauthorized payments or embezzlement. While options A, B, and C are also important considerations, they are not the primary purpose of the auditor's observation.

Question 17

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

Accepted Answer

There are inherent risk factors such as turnover, employee fraud, compliance issues, legal issues, and external factors like economic conditions, which can impact the human resource management process and its related accounts for non-officers.

Question 18

The proper use of prenumbered termination notice forms by the Payroll Department should provide assurance that all
A) uncashed payroll checks were issued to employees who have not been terminated.
B) personnel files are kept up to date.
C) employees who have not been terminated receive their payroll checks.
D) terminated employees are removed from the payroll.

Accepted Answer

The use of prenumbered termination notice forms is intended to ensure that terminated employees are efficiently and accurately removed from the payroll system.

Question 19

When examining payroll transactions,an auditor is primarily concerned with the possibility of
A) underpayments and properly authorized payments.
B) posting of gross payroll amounts to incorrect salary expense accounts.
C) misfootings of employee time records.
D) excess withholding of amounts required to be withheld.
AICPA: BB Industry
AICPA: FN Risk Analysis
Accessibility: Keyboard Navigation

Accepted Answer

An auditor is primarily concerned with the accuracy of financial statements, which includes ensuring that payroll expenses are recorded in the correct accounts. Misposting could lead to misstated financial statements.

Question 20

The human resource function is responsible for managing the personnel needs of the organization.

Accepted Answer

The human resource function is indeed responsible for managing the personnel needs of the organization. This includes recruitment, hiring, training, benefits administration, employee relations, and more.

Quiz 12: Auditing the Human Resource Management Process

Which of the following could test the assertion of classification for payroll-related liabilities?

Tests of details of transactions are often conducted in conjunction with tests of controls.

If the results of the control tests do not support the planned level of control risk,the detection risk will have to be set higher.

Proper segregation of duties is critical for the human resource management process.

An auditor vouched data for a sample of employees in a payroll register to approved clock card/time sheet data to provide assurance that

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except:

Payroll-related expenses normally are not a material cost to the organization.

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?

All of the following are incorporated into valuation models except:

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

The payroll-processing function is responsible for paying employees for services and benefits.

Which of the following could test the assertion of cutoff for payroll-related liabilities?

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?

A surprise observation by an auditor of an entity's regular distribution of paychecks is primarily designed to satisfy the auditor that

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

The proper use of prenumbered termination notice forms by the Payroll Department should provide assurance that all

When examining payroll transactions,an auditor is primarily concerned with the possibility of

The human resource function is responsible for managing the personnel needs of the organization.