Question 1

Which of the following errors gives the auditor the least concern in auditing payroll transactions?

Accepted Answer

A) An error that indicates possible fraud 
B) Computational errors in formulas when a computerized system is used 
C) Classification errors in charging labor to inventory and job cost accounts 
D) Each of the above gives the auditor significant concern. 
A) An error that indicates possible fraud 
B) Computational errors in formulas when a computerized system is used 
C) Classification errors in charging labor to inventory and job cost accounts 
D) Each of the above gives the auditor significant concern. D

Question 2

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  True

Question 3

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. A

Question 4

What are the two major balance-related audit objectives in testing payroll liabilities?

Accepted Answer

A) Accuracy and detail tie-in 
B) Completeness and valuation 
C) Completeness and rights and obligations 
D) Accuracy and cutoff 
A) Accuracy and detail tie-in 
B) Completeness and valuation 
C) Completeness and rights and obligations 
D) Accuracy and cutoff

Question 5

No individual with access to time cards, payroll records, or checks should also be permitted access to:

Accepted Answer

A) the computer. 
B) job time tickets. 
C) personnel records. 
D) the canceled check file. 
A) the computer. 
B) job time tickets. 
C) personnel records. 
D) the canceled check file.

Question 6

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 7

Auditors seldom expect to find misstatements when testing payroll transactions.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Match between columns
                        Premises: A document written in exchange for services received from an employee.
A form used to authorize the amount of pay.
A document indicating the time the hourly employee started and stopped working.
A file used for recording payroll transactions for each employee and maintaining total employee wages paid for the year to date.
A form authorizing payroll deductions including the number of exemptions for withholding of income taxes U.S.savings bonds and union dues.
Records including date of employment personnel investigations rates of pay etc.
Forms submitted to local state and federal units of government for the payment of withheld taxes and the employer's tax.

Accepted Answer

The Answer of Summary payroll report and Time record and is...

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

Many companies use outside payroll services to process payroll.Which of the following regarding the auditor's responsibilities is most correct regarding their reliance on the internal controls of these outside payroll services?

Accepted Answer

A) Must 
B) Cannot 
C) Rarely 
D) Can often 
A) Must 
B) Cannot 
C) Rarely 
D) Can often

Question 12

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 13

An imprest payroll account that has a significant balance may indicate the presence of:

Accepted Answer

A) employees have not yet deposited or cashed payroll checks. 
B) fraudulent transfer of funds by the company. 
C) lack of controls over payroll distribution. 
D) the company is overpaying its employees. 
A) employees have not yet deposited or cashed payroll checks. 
B) fraudulent transfer of funds by the company. 
C) lack of controls over payroll distribution. 
D) the company is overpaying its employees.

Question 14

Audit tests of payroll are usually not extensive because:

Accepted Answer

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

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Generally, is the inherent risk level for the audit of the payroll and personnel set at low, moderate, or high?
 Explain.

Accepted Answer

Generally set low since there is only on

Question 17

Which of the following is a major balance-related audit objective in testing payroll liabilities?

Accepted Answer

A) Payroll tax expense is properly recorded. 
B) Transactions in the payroll and personnel cycle are recorded in the proper period. 
C) Accrual of salaries is the same as the amounts paid on the payroll tax returns. 
D) Time records are recorded by supervisors. 
A) Payroll tax expense is properly recorded. 
B) Transactions in the payroll and personnel cycle are recorded in the proper period. 
C) Accrual of salaries is the same as the amounts paid on the payroll tax returns. 
D) Time records are recorded by supervisors.

Question 18

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 o 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 w

Question 19

Auditors should determine whether the client has fulfilled its legal obligation in submitting payments of all payroll withholdings as part of their payroll tests.

Accepted Answer

A) True 
 B)False

Question 20

In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can:

Accepted Answer

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

Exam 20: Audit of the Payroll and Personnel Cycle

Which of the following errors gives the auditor the least concern in auditing payroll transactions?

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

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:

What are the two major balance-related audit objectives in testing payroll liabilities?

No individual with access to time cards, payroll records, or checks should also be permitted access to:

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.

Auditors seldom expect to find misstatements when testing payroll transactions.

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

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

Many companies use outside payroll services to process payroll.Which of the following regarding the auditor's responsibilities is most correct regarding their reliance on the internal controls of these outside payroll services?

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

An imprest payroll account that has a significant balance may indicate the presence of:

Audit tests of payroll are usually not extensive because:

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

Generally, is the inherent risk level for the audit of the payroll and personnel set at low, moderate, or high? Explain.

Which of the following is a major balance-related audit objective in testing payroll liabilities?

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 o 5 working days.If the auditor has determined that controls are effective over payroll, what additional work should the auditor perform for this account?

Auditors should determine whether the client has fulfilled its legal obligation in submitting payments of all payroll withholdings as part of their payroll tests.

In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can:

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

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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