Question 1

The file for recording each payroll transaction for each employee and maintaining total employee wages paid for the year to date is the

Accepted Answer

A)  payroll master file. 
B)  payroll transaction file. 
C)  payroll journal. 
D)  job time ticket. 
A)  payroll master file. 
B)  payroll transaction file. 
C)  payroll journal. 
D)  job time ticket.

Question 2

Which of the following controls best prevents employees from checking in for more than one employee?

Accepted Answer

A)  use of numerically controlled punch-in cards 
B)  placing the punch clock in full view of the receptionist 
C)  time cards stored in a wall rack 
D)  a personalized swipe card 
A)  use of numerically controlled punch-in cards 
B)  placing the punch clock in full view of the receptionist 
C)  time cards stored in a wall rack 
D)  a personalized swipe card

Question 3

"Recorded payroll transactions are for the amount of time actually worked and at the proper pay rate; withholdings are properly calculated" relates to which control objective?

Accepted Answer

A)  authorization 
B)  completeness 
C)  existence 
D)  accuracy 
A)  authorization 
B)  completeness 
C)  existence 
D)  accuracy

Question 4

Which of the following tests of controls would pertain to whether existing payroll transactions are recorded?

Accepted Answer

A)  Compare cancelled cheques with payroll journal details. 
B)  Compare cancelled cheques with payroll records. 
C)  Foot the payroll journal and trace details to the general ledger. 
D)  Conduct gap testing for a sequence of payroll cheques. 
A)  Compare cancelled cheques with payroll journal details. 
B)  Compare cancelled cheques with payroll records. 
C)  Foot the payroll journal and trace details to the general ledger. 
D)  Conduct gap testing for a sequence of payroll cheques.

Question 5

You have been working on the audit of Big Insurance Company for several years now. There are about 5000 employees working at the company in various positions.
Your audit partner has indicated that this year, the firm will be implementing computer-assisted audit techniques (CAATs), using generalized audit software. The information systems audit specialist will be assisting the audit team with the implementation of these tests. She wants you to provide a draft list of CAATs that could assist with the coming year's audit of payroll.
The company uses mainframe computing systems. Assume that the typical payroll information is available on computer files (i.e., employee number, employee name, social insurance number, department code, payment type code (salaried or hourly), time worked, wage rate, gross pay, deductions (by type), net pay, and cheque number).
Required:
Prepare a list of potential computer-assisted audit techniques that could be prepared for the payroll audit. Identify the audit objective to which they relate and indicate if any manual procedures are required to supplement the suggested CAAT.

Accepted Answer

Note: This is a sample of CAATs. Other t

Question 6

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

Accepted Answer

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. 
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.

Question 7

Which of the following internal control tests would help to assess whether payroll transactions were recorded on the correct dates?

Accepted Answer

A)  Compare cancelled cheques with payroll journal for name, amount, and date. 
B)  Compare date on cheque with date the cheque cleared the bank. 
C)  Compare cancelled cheques with personnel records. 
D)  Recompute hours worked from pay records. 
A)  Compare cancelled cheques with payroll journal for name, amount, and date. 
B)  Compare date on cheque with date the cheque cleared the bank. 
C)  Compare cancelled cheques with personnel records. 
D)  Recompute hours worked from pay records.

Question 8

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

Accepted Answer

A)  overpayments and unauthorized 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. 
A)  overpayments and unauthorized 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.

Question 9

Which of the following internal controls would assist in ensuring that recorded payroll transactions are for the amount of time actually worked and at the proper pay rate, and that withholdings are properly calculated?

Accepted Answer

A)  comparison of batch totals with computer summary reports 
B)  comparison of payroll master file with payroll general ledger totals 
C)  adequate personnel files 
D)  separation of duties between personnel, timekeeping, and payroll disbursements 
A)  comparison of batch totals with computer summary reports 
B)  comparison of payroll master file with payroll general ledger totals 
C)  adequate personnel files 
D)  separation of duties between personnel, timekeeping, and payroll disbursements

Question 10

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

Accepted Answer

A)  tests of controls 
B)  risk analysis and obtaining an understanding of controls 
C)  analytical procedures 
D)  tests of details of balances 
A)  tests of controls 
B)  risk analysis and obtaining an understanding of controls 
C)  analytical procedures 
D)  tests of details of balances

Question 11

When manufacturing labour affects inventory valuation, a knowledgeable manager should approve wage rate allocations to make sure that labour is distributed to the proper accounts. Which of the following controls helps to prevent error in the resulting job costing?

Accepted Answer

A)  comparison of wage rates to the authorized payroll master file 
B)  independent comparison of the approved amounts to the data entered 
C)  continuity check of the payroll cheque numbers issued 
D)  reconciliation of gross pay on the payroll register with gross pay according to the payroll master file 
A)  comparison of wage rates to the authorized payroll master file 
B)  independent comparison of the approved amounts to the data entered 
C)  continuity check of the payroll cheque numbers issued 
D)  reconciliation of gross pay on the payroll register with gross pay according to the payroll master file

Question 12

A weak internal control system allows a foreman to clock in daily for a fictitious employee and to approve the time card at the end of the payroll period. This fraud would be detected if other controls were in place, such as having an independent party

Accepted Answer

A)  compare the date of the recorded cheque in the payroll journal with the date on the cancelled cheques and time cards. 
B)  foot the payroll journal and trace postings to the general ledger and the payroll master file. 
C)  recompute hours worked from time cards. 
D)  distribute paycheques. 
A)  compare the date of the recorded cheque in the payroll journal with the date on the cancelled cheques and time cards. 
B)  foot the payroll journal and trace postings to the general ledger and the payroll master file. 
C)  recompute hours worked from time cards. 
D)  distribute paycheques.

Question 13

Which of the following is a test of controls?

Accepted Answer

A)  reviewing the payroll journal, general ledger, and payroll earnings records for large or unusual amounts 
B)  examining time cards for indication of supervisor approval 
C)  comparing cancelled cheques with payroll journal for name, amount, and date 
D)  examining cancelled cheques for proper endorsement 
A)  reviewing the payroll journal, general ledger, and payroll earnings records for large or unusual amounts 
B)  examining time cards for indication of supervisor approval 
C)  comparing cancelled cheques with payroll journal for name, amount, and date 
D)  examining cancelled cheques for proper endorsement

Question 14

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 six transactions-related audit objec

Question 15

Which of the following internal control tests would be used in assessing that recorded payroll transactions are for the amount of time actually worked and at the proper pay rate, and that withholdings are properly calculated?

Accepted Answer

A)  Foot the payroll journal and trace to the general ledger. 
B)  Prove the bank reconciliation. 
C)  Recompute gross pay. 
D)  Review the payroll journal for large or unusual amounts. 
A)  Foot the payroll journal and trace to the general ledger. 
B)  Prove the bank reconciliation. 
C)  Recompute gross pay. 
D)  Review the payroll journal for large or unusual amounts.

Question 16

Joan has been the payroll supervisor at York Distribution Company (YDC) for ten years. She has never missed a payroll and Farah, the owner of the company, is delighted with her conscientiousness and knowledge. This is particularly important, as Farah spends a lot of time on the road drumming up new business, and needs competent personnel back at the office.
There are two accounting personnel at the office, a receptionist, five shipping and receiving personnel, and thirty sales people employed by YDC. Office and shipping/receiving personnel are paid a salary, while the sales people are paid a monthly base salary plus a percentage of their sales, calculated quarterly. The base salary is low, at $20 000, with a 2% commission, calculated based on sales less any bad debts written off related to their customers.
Joan prints off the sales by customer every month and uses this information to calculate commissions. She then prepares the payroll cheques and gives them to Farah, who signs them and gives them to the sales staff at the monthly sales meeting. The cheques are written against a payroll imprest bank account, kept at a balance of $1000. This account is not reconciled, as the staff are very overworked with the increasing volume of business handled by the company.
Required:
A) Identify control weaknesses and their impact, and provide recommendations for improvement.
B) What is the impact of the control weaknesses upon your audit approach?

Accepted Answer

A)1. Weakness: There is inadequate segre

Question 17

Access rights management is important because it is the organization's method of

Accepted Answer

A)  establishing data tables usage. 
B)  identifying master file data. 
C)  identifying transaction file data. 
D)  enforcing segregation of duties. 
A)  establishing data tables usage. 
B)  identifying master file data. 
C)  identifying transaction file data. 
D)  enforcing segregation of duties.

Question 18

General controls must be evaluated and their impact considered upon the human resources and payroll transaction cycle because

Accepted Answer

A)  there are frequently weaknesses in internal controls in the payroll cycle. 
B)  automated techniques are normally used to prepare and post payroll transactions. 
C)  the best way to test payroll transactions is usually by using test data. 
D)  the best way to test payroll transactions is usually by using generalized audit software. 
A)  there are frequently weaknesses in internal controls in the payroll cycle. 
B)  automated techniques are normally used to prepare and post payroll transactions. 
C)  the best way to test payroll transactions is usually by using test data. 
D)  the best way to test payroll transactions is usually by using generalized audit software.

Question 19

As part of your audit of the payroll for Jones Chu Company Limited (JCC), you used generalized audit software. You had available to you the payroll transactions for the month of September and the employee master file as of September 30. You conducted the following tests, with results noted:
1. Ran a duplicates test on employee number in the transaction file. You found that one employee, employee #320, had been paid twice, using cheque numbers 12376 and 12377.
2. Checked the calculation of "pay per period" in the employee master file (divided the salary field by 12 to derive the monthly pay). It was found that for two employees these calculations did not match. Employee #20 had a pay of $200 higher than the calculation, while employee #220 had a pay that was $65 higher than the calculations.
3. Checked that "gross pay" less "unemployment insurance, Canada Pension Plan and income taxes deducted" equals "net pay." No errors were found.
Required:
For each audit test:
i) Describe the audit assertion associated with your audit test.
ii) Discuss the results that the auditor would have expected before running the test.
iii) Discuss the implications of the findings on the audit process or on specific audit procedures.

Accepted Answer

1. i)Duplicated employee number
ii)Asser

Question 20

Which of the following internal control tests would assist in satisfying the occurrence transaction-related audit objective for payroll?

Accepted Answer

A)  examining payroll records for evidence of approval 
B)  proving the payroll bank reconciliation 
C)  reviewing the chart of accounts 
D)  accounting for a sequence of payroll cheques 
A)  examining payroll records for evidence of approval 
B)  proving the payroll bank reconciliation 
C)  reviewing the chart of accounts 
D)  accounting for a sequence of payroll cheques

The file for recording each payroll transaction for each employee and maintaining total employee wages paid for the year to date is the

Which of the following controls best prevents employees from checking in for more than one employee?

"Recorded payroll transactions are for the amount of time actually worked and at the proper pay rate; withholdings are properly calculated" relates to which control objective?

Which of the following tests of controls would pertain to whether existing payroll transactions are recorded?

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

Which of the following internal control tests would help to assess whether payroll transactions were recorded on the correct dates?

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

Which of the following internal controls would assist in ensuring that recorded payroll transactions are for the amount of time actually worked and at the proper pay rate, and that withholdings are properly calculated?

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

When manufacturing labour affects inventory valuation, a knowledgeable manager should approve wage rate allocations to make sure that labour is distributed to the proper accounts. Which of the following controls helps to prevent error in the resulting job costing?

A weak internal control system allows a foreman to clock in daily for a fictitious employee and to approve the time card at the end of the payroll period. This fraud would be detected if other controls were in place, such as having an independent party

Which of the following is a test of controls?

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.

Which of the following internal control tests would be used in assessing that recorded payroll transactions are for the amount of time actually worked and at the proper pay rate, and that withholdings are properly calculated?

Access rights management is important because it is the organization's method of

General controls must be evaluated and their impact considered upon the human resources and payroll transaction cycle because

Which of the following internal control tests would assist in satisfying the occurrence transaction-related audit objective for payroll?

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 15: Audit of the Human Resources and Payroll Cycle

The file for recording each payroll transaction for each employee and maintaining total employee wages paid for the year to date is the

Which of the following controls best prevents employees from checking in for more than one employee?

"Recorded payroll transactions are for the amount of time actually worked and at the proper pay rate; withholdings are properly calculated" relates to which control objective?

Which of the following tests of controls would pertain to whether existing payroll transactions are recorded?

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

Which of the following internal control tests would help to assess whether payroll transactions were recorded on the correct dates?

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

Which of the following internal controls would assist in ensuring that recorded payroll transactions are for the amount of time actually worked and at the proper pay rate, and that withholdings are properly calculated?

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

When manufacturing labour affects inventory valuation, a knowledgeable manager should approve wage rate allocations to make sure that labour is distributed to the proper accounts. Which of the following controls helps to prevent error in the resulting job costing?

A weak internal control system allows a foreman to clock in daily for a fictitious employee and to approve the time card at the end of the payroll period. This fraud would be detected if other controls were in place, such as having an independent party

Which of the following is a test of controls?

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.

Which of the following internal control tests would be used in assessing that recorded payroll transactions are for the amount of time actually worked and at the proper pay rate, and that withholdings are properly calculated?

Access rights management is important because it is the organization's method of

General controls must be evaluated and their impact considered upon the human resources and payroll transaction cycle because

Which of the following internal control tests would assist in satisfying the occurrence transaction-related audit objective for payroll?

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters