Question 1

Auditors may extend their tests of payroll in which of the following circumstances?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

If an auditor wishes to test the completeness transaction-related audit objective in the payroll and personnel cycle,which of the following would be a reasonable test of control?

Accepted Answer

A) Account for a sequence of payroll checks. 
B) Examine the procedures manual and observe the recording of transactions. 
C) Examine the payroll records for indication of pay rate approval. 
D) Reconcile the payroll bank account. 
A) Account for a sequence of payroll checks. 
B) Examine the procedures manual and observe the recording of transactions. 
C) Examine the payroll records for indication of pay rate approval. 
D) Reconcile the payroll bank account.

Question 3

It would be appropriate for the payroll department to be responsible for which of the following functions?

Accepted Answer

A) approval of employee time records 
B) maintain records of employment,firings,and raises 
C) temporary retention of unclaimed employee paychecks 
D) preparation of governmental reports as to employees' earnings and withholding taxes 
A) approval of employee time records 
B) maintain records of employment,firings,and raises 
C) temporary retention of unclaimed employee paychecks 
D) preparation of governmental reports as to employees' earnings and withholding taxes

Question 4

The most important means of verifying account balances in the payroll and personnel cycle are

Accepted Answer

A) tests of controls and substantive tests of transactions. 
B) analytical procedures and tests of controls. 
C) analytical procedures and substantive tests of transactions. 
D) tests of controls and tests of details of balances. 
A) tests of controls and substantive tests of transactions. 
B) analytical procedures and tests of controls. 
C) analytical procedures and substantive tests of transactions. 
D) tests of controls and tests of details of balances.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

For most clients,the balance sheet accounts related to payroll are normally insignificant,except for labor charged to inventory.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a correct statement regarding fraudulent hours?

Accepted Answer

A) Fraudulent hours occur when an employee reports more time than was actually worked. 
B) It is difficult for an auditor to discover fraudulent hours. 
C) It is ordinarily easier for the client to prevent fraudulent hours by adequate internal controls than for the auditor to detect it. 
D) To detect fraudulent hours,the auditor should examine the cancelled checks written to the employees. 
A) Fraudulent hours occur when an employee reports more time than was actually worked. 
B) It is difficult for an auditor to discover fraudulent hours. 
C) It is ordinarily easier for the client to prevent fraudulent hours by adequate internal controls than for the auditor to detect it. 
D) To detect fraudulent hours,the auditor should examine the cancelled checks written to the employees.

Question 8

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

Accepted Answer

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. 
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.

Question 9

Examining payroll records for an indication of authorization is part of the timing transaction-related audit objective.

Accepted Answer

A) True 
 B)False

Question 10

Which department should be authorized to add and delete employees from the payroll or change pay rates and deductions?

Accepted Answer

A) the supervising department 
B) the accounting department 
C) the human resources department 
D) the treasurer's department 
A) the supervising department 
B) the accounting department 
C) the human resources department 
D) the treasurer's department

Question 11

Which of the following includes all payroll transactions processed by the accounting system for a given period of time?

Accepted Answer

A) payroll journal 
B) payroll transaction file 
C) time report 
D) payroll summary 
A) payroll journal 
B) payroll transaction file 
C) time report 
D) payroll summary

Question 12

The primary concern in testing payroll-related liabilities is to make sure that

Accepted Answer

A) accruals are properly valued. 
B) transactions are recorded in the proper period. 
C) there are no understated or omitted accruals. 
D) the accruals are not overstated. 
A) accruals are properly valued. 
B) transactions are recorded in the proper period. 
C) there are no understated or omitted accruals. 
D) the accruals are not overstated.

Question 13

Despite the large dollar amounts involved in the payroll and personnel cycle,auditors typically spend less time auditing this cycle than others.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a key control for the transaction-related audit objective of accuracy?

Accepted Answer

A) The time records are approved by a supervisor. 
B) The payroll checks are prenumbered and accounted for. 
C) The payroll master file contents are internally verified. 
D) The batch totals are compared with computer summary reports. 
A) The time records are approved by a supervisor. 
B) The payroll checks are prenumbered and accounted for. 
C) The payroll master file contents are internally verified. 
D) The batch totals are compared with computer summary reports.

Question 15

Which of the following departments is most likely responsible for pay rate changes and changes in deductible amounts for employees?

Accepted Answer

A) general accounting department 
B) human resources department 
C) treasurer 
D) controller 
A) general accounting department 
B) human resources department 
C) treasurer 
D) controller

Question 16

The usual audit test for a public company's officer compensation is to obtain the authorized salary of each officer from the minutes of the board of directors and compare it with

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 17

Because of confidentiality requirements and potential losses of payroll funds,outside service center systems are rarely used by companies for payroll-related functions.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) in the expense account. 
B) used in the prior period. 
C) authorized in the minutes of the board. 
D) paid in the subsequent period. 
A) in the expense account. 
B) used in the prior period. 
C) authorized in the minutes of the board. 
D) paid in the subsequent period.

Question 19

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

Accepted Answer

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. 
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.

Question 20

Imprest accounts usually carry a significant balance.

Accepted Answer

A) True 
 B)False

Exam 20: Audit of the Payroll and Personnel Cycle

Auditors may extend their tests of payroll in which of the following circumstances?

If an auditor wishes to test the completeness transaction-related audit objective in the payroll and personnel cycle,which of the following would be a reasonable test of control?

It would be appropriate for the payroll department to be responsible for which of the following functions?

The most important means of verifying account balances in the payroll and personnel cycle are

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

For most clients,the balance sheet accounts related to payroll are normally insignificant,except for labor charged to inventory.

Which of the following is not a correct statement regarding fraudulent hours?

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

Examining payroll records for an indication of authorization is part of the timing transaction-related audit objective.

Which department should be authorized to add and delete employees from the payroll or change pay rates and deductions?

Which of the following includes all payroll transactions processed by the accounting system for a given period of time?

The primary concern in testing payroll-related liabilities is to make sure that

Despite the large dollar amounts involved in the payroll and personnel cycle,auditors typically spend less time auditing this cycle than others.

Which of the following is a key control for the transaction-related audit objective of accuracy?

Which of the following departments is most likely responsible for pay rate changes and changes in deductible amounts for employees?

The usual audit test for a public company's officer compensation is to obtain the authorized salary of each officer from the minutes of the board of directors and compare it with

Because of confidentiality requirements and potential losses of payroll funds,outside service center systems are rarely used by companies for payroll-related functions.

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

Imprest accounts usually carry a significant balance.

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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