Question 1

It is usually very easy for an auditor to determine if an employee has overstated their hours worked.

Accepted Answer

A) True 
 B)False  False

Question 2

Tests of controls and tests of details of balances are the auditor's most important means of verifying account balances in the payroll and personnel cycle.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following is a substantive test of transactions?

Accepted Answer

A) Review personnel policies. 
B) Account for a sequence of payroll checks. 
C) Reconcile the disbursements in the payroll journal with the disbursements on the payroll bank statement. 
D) Examine printouts of transactions rejected by the computer as having invalid employee IDs. 
A) Review personnel policies. 
B) Account for a sequence of payroll checks. 
C) Reconcile the disbursements in the payroll journal with the disbursements on the payroll bank statement. 
D) Examine printouts of transactions rejected by the computer as having invalid employee IDs. C

Question 4

The two major balance-related audit objectives in testing payroll liabilities are accuracy and cutoff.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is false?

Accepted Answer

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. 
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.

Question 6

When labor is a material factor in inventory valuation,the auditor should place special emphasis on testing the internal controls concerning

Accepted Answer

A) fictitious employees. 
B) authorization of wage rates. 
C) proper classification of payroll transactions. 
D) completeness of recorded transactions. 
A) fictitious employees. 
B) authorization of wage rates. 
C) proper classification of payroll transactions. 
D) completeness of recorded transactions.

Question 7

Payroll checks should be distributed by someone independent of the payroll and timekeeping functions.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) incorrect summaries of employee time records. 
B) overpayments and unauthorized payments. 
C) under withholding of amounts required to be withheld. 
D) posting of gross payroll amounts to incorrect salary expense accounts. 
A) incorrect summaries of employee time records. 
B) overpayments and unauthorized payments. 
C) under withholding of amounts required to be withheld. 
D) posting of gross payroll amounts to incorrect salary expense accounts.

Question 9

Which of the following best describes inherent risk for balance-related audit objectives as they relate to payroll?

Accepted Answer

A) not considered 
B) low 
C) moderate 
D) high 
A) not considered 
B) low 
C) moderate 
D) high

Question 10

The auditor ________ rely on the internal controls of the payroll service organization if the service organization's auditor issues a report on the service organization's internal control.

Accepted Answer

A) must 
B) cannot 
C) can rarely 
D) can often 
A) must 
B) cannot 
C) can rarely 
D) can often

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Firing personnel terminates the payroll and personnel cycle.

Accepted Answer

A) True 
 B)False

Question 13

What is one audit procedure that may be used to test for proper handling of terminated employees?

Accepted Answer

A procedure that tests for proper handli

Question 14

Auditors typically test details of account balances in the audit of payroll.

Accepted Answer

A) True 
 B)False

Question 15

When auditing the payroll and personnel cycle,the auditor should keep in mind that

Accepted Answer

A) since payroll transactions are typically uniform,all companies have the same internal controls over payroll. 
B) the substantive tests of transactions for the payroll cycle are the same for all audit clients. 
C) controls the auditor intends to rely on to reduce assessed control risk must be tested with tests of controls. 
D) the tests of controls and the substantive tests of transactions for payroll cannot be combined. 
A) since payroll transactions are typically uniform,all companies have the same internal controls over payroll. 
B) the substantive tests of transactions for the payroll cycle are the same for all audit clients. 
C) controls the auditor intends to rely on to reduce assessed control risk must be tested with tests of controls. 
D) the tests of controls and the substantive tests of transactions for payroll cannot be combined.

Question 16

Which of the following statements is correct?

Accepted Answer

A) The overhead charged to inventory at the balance sheet date can be understated if the salaries of administrative personnel are inadvertently or intentionally charged to indirect manufacturing overhead. 
B) When jobs are billed on a cost-plus basis,revenue and total expenses are both affected by charging labor to incorrect jobs. 
C) Payroll is a significant portion of inventory for retail and service industry companies. 
D) The valuation of inventory is affected if the direct labor cost of individual employees is improperly charged to the wrong job or process. 
A) The overhead charged to inventory at the balance sheet date can be understated if the salaries of administrative personnel are inadvertently or intentionally charged to indirect manufacturing overhead. 
B) When jobs are billed on a cost-plus basis,revenue and total expenses are both affected by charging labor to incorrect jobs. 
C) Payroll is a significant portion of inventory for retail and service industry companies. 
D) The valuation of inventory is affected if the direct labor cost of individual employees is improperly charged to the wrong job or process.

Question 17

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

•Human resource records.These records in

Question 18

When labor is a material part of inventory valuation,auditors should emphasize testing internal controls over proper classification of payroll transactions.

Accepted Answer

A) True 
 B)False

Question 19

The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges.The most important control in the timely preparation of these returns is

Accepted Answer

A) computerized preparation of tax returns. 
B) a well-defined set of policies that indicate when each form must be filed. 
C) independent verification of computer output by a competent individual. 
D) the use of an outside payroll service. 
A) computerized preparation of tax returns. 
B) a well-defined set of policies that indicate when each form must be filed. 
C) independent verification of computer output by a competent individual. 
D) the use of an outside payroll service.

Question 20

In auditing payroll,the auditor wants to determine that the individuals included in her sample were employees of the company for the period under review.What is the auditor's best source of evidence?

Accepted Answer

A) examination of human resource records 
B) examination of the payroll master file 
C) examination of the payroll transaction file 
D) examination of the payroll tax records 
A) examination of human resource records 
B) examination of the payroll master file 
C) examination of the payroll transaction file 
D) examination of the payroll tax records

Exam 20: Audit of the Payroll and Personnel Cycle

It is usually very easy for an auditor to determine if an employee has overstated their hours worked.

Tests of controls and tests of details of balances are the auditor's most important means of verifying account balances in the payroll and personnel cycle.

Which of the following is a substantive test of transactions?

The two major balance-related audit objectives in testing payroll liabilities are accuracy and cutoff.

Which of the following statements is false?

When labor is a material factor in inventory valuation,the auditor should place special emphasis on testing the internal controls concerning

Payroll checks should be distributed by someone independent of the payroll and timekeeping functions.

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

Which of the following best describes inherent risk for balance-related audit objectives as they relate to payroll?

The auditor ________ rely on the internal controls of the payroll service organization if the service organization's auditor issues a report on the service organization's internal control.

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

Firing personnel terminates the payroll and personnel cycle.

What is one audit procedure that may be used to test for proper handling of terminated employees?

Auditors typically test details of account balances in the audit of payroll.

When auditing the payroll and personnel cycle,the auditor should keep in mind that

Which of the following statements is correct?

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.

When labor is a material part of inventory valuation,auditors should emphasize testing internal controls over proper classification of payroll transactions.

The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges.The most important control in the timely preparation of these returns is

In auditing payroll,the auditor wants to determine that the individuals included in her sample were employees of the company for the period under review.What is the auditor's best source of evidence?

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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