Question 1

The primary purpose of a surprise payroll payoff is to detect employees who have reported more time than was actually worked (fraudulent hours).

Accepted Answer

A) True 
 B)False

Question 2

The audit procedure "recompute hours worked from time cards" is normally performed when testing the completeness objective for payroll.

Accepted Answer

A) True 
 B)False

Question 3

Verifying that an adequate chart of accounts is used is a key internal control for the transaction-related objective of

Accepted Answer

A) classification. 
B) accuracy. 
C) existence. 
D) occurrence. 
A) classification. 
B) accuracy. 
C) existence. 
D) occurrence.

Question 4

What events initiate and terminate the payroll and personnel cycle?

Accepted Answer

The hiring of an employee init

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Mathews and Company has $112,000 in an accrued payroll account.The company's weekly payroll is $186,700 and the accrual represents 3 days out of 5 working days.If the auditor has determined that controls are effective over payroll,what additional work should the auditor perform for this account?

Accepted Answer

186,700 ∗ 0.60 (3/5)= 112,020

Question 7

What key separation of duties should the auditor expect to find within the payroll and personnel cycle?

Accepted Answer

The human resources department should be

Question 8

On most audits,the calculation for payroll tax expense is costly and is not necessary unless analytical procedures indicate a problem that cannot be resolved through other procedures.

Accepted Answer

A) True 
 B)False

Question 9

As a part of the auditor's responsibility for ________,the auditor should review the preparation of at least one of each type of payroll tax form the client is responsible for filing.

Accepted Answer

A) fraud awareness 
B) doing tests of balances 
C) doing tests of transactions 
D) understanding the client's internal controls 
A) fraud awareness 
B) doing tests of balances 
C) doing tests of transactions 
D) understanding the client's internal controls

Question 10

Although significant client business risks affecting payroll are unlikely for most companies,an area that would have the most business risk would be

Accepted Answer

A) payment of hourly employees. 
B) payment of salaried employees. 
C) payments to employees for stock options and bonus plans. 
D) payments to employees who have direct deposit of their payroll checks. 
A) payment of hourly employees. 
B) payment of salaried employees. 
C) payments to employees for stock options and bonus plans. 
D) payments to employees who have direct deposit of their payroll checks.

Question 11

Most companies,with the exception of small ones,have effective controls over the payroll cycle.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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

Question 14

Which of the following is not one of the business functions for the payroll and personnel cycle?

Accepted Answer

A) payment of payroll 
B) timekeeping and payroll preparation 
C) reconciliation of payroll account 
D) human resources and employment 
A) payment of payroll 
B) timekeeping and payroll preparation 
C) reconciliation of payroll account 
D) human resources and employment

Question 15

Audit tests of payroll are usually not extensive because

Accepted Answer

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

Question 16

________ is not a transaction-related audit objective for the classes of transactions underlying the payroll cycle.

Accepted Answer

A) Classification 
B) Existence 
C) Timing 
D) Completeness 
A) Classification 
B) Existence 
C) Timing 
D) Completeness

Question 17

Internal control over payroll is normally highly structured and well controlled.

Accepted Answer

A) True 
 B)False

Question 18

The most important consideration in evaluating the fairness of the amounts accrued for vacation pay,sick pay,and other benefits is the

Accepted Answer

A) consistent accrual of these liabilities relative to those of preceding periods. 
B) actual expense incurred for the prior period. 
C) amount expended to date in the current period. 
D) profitability of the client which will enable these liabilities to be met. 
A) consistent accrual of these liabilities relative to those of preceding periods. 
B) actual expense incurred for the prior period. 
C) amount expended to date in the current period. 
D) profitability of the client which will enable these liabilities to be met.

Question 19

When auditing the payroll and personnel cycle,tests of controls are routinely performed.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following types of audit procedures is ordinarily emphasized the least when auditing payroll?

Accepted Answer

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

Exam 20: Audit of the Payroll and Personnel Cycle

The primary purpose of a surprise payroll payoff is to detect employees who have reported more time than was actually worked (fraudulent hours).

The audit procedure "recompute hours worked from time cards" is normally performed when testing the completeness objective for payroll.

Verifying that an adequate chart of accounts is used is a key internal control for the transaction-related objective of

What events initiate and terminate the payroll and personnel cycle?

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

Mathews and Company has $112,000 in an accrued payroll account.The company's weekly payroll is $186,700 and the accrual represents 3 days out of 5 working days.If the auditor has determined that controls are effective over payroll,what additional work should the auditor perform for this account?

What key separation of duties should the auditor expect to find within the payroll and personnel cycle?

On most audits,the calculation for payroll tax expense is costly and is not necessary unless analytical procedures indicate a problem that cannot be resolved through other procedures.

As a part of the auditor's responsibility for ________,the auditor should review the preparation of at least one of each type of payroll tax form the client is responsible for filing.

Although significant client business risks affecting payroll are unlikely for most companies,an area that would have the most business risk would be

Most companies,with the exception of small ones,have effective controls over the payroll cycle.

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

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

Which of the following is not one of the business functions for the payroll and personnel cycle?

Audit tests of payroll are usually not extensive because

________ is not a transaction-related audit objective for the classes of transactions underlying the payroll cycle.

Internal control over payroll is normally highly structured and well controlled.

The most important consideration in evaluating the fairness of the amounts accrued for vacation pay,sick pay,and other benefits is the

When auditing the payroll and personnel cycle,tests of controls are routinely performed.

Which of the following types of audit procedures is ordinarily emphasized the least when auditing payroll?

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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