Question 1

The computer file used for recording payroll transactions for each employee and maintaining total wages paid for the year to date is the:

Accepted Answer

A) payroll transaction file. 
B) payroll master file. 
C) payroll bank account reconciliation. 
D) payroll tax returns. 
A) payroll transaction file. 
B) payroll master file. 
C) payroll bank account reconciliation. 
D) payroll tax returns.

Question 2

Records that include data about employees such as employment date, performance ratings and pay rates are the:

Accepted Answer

A)  human resource records. 
B) employee screening forms. 
C) summary payroll reports. 
D) employee folders. 
A)  human resource records. 
B) employee screening forms. 
C) summary payroll reports. 
D) employee folders.

Question 3

Which of the following is an accurate statement regarding nonexistent employees?

Accepted Answer

A) In order to prevent this type of fraud, the foreman should distribute the paychecks and approve the time cards. 
B) Records for all terminated employees should be destroyed to prevent this type of fraud. 
C) The person committing this type of fraud is generally the CEO or CFO of the company. 
D) This type of fraud often results from the continuance of an employee on the payroll after the employee has been terminated. 
A) In order to prevent this type of fraud, the foreman should distribute the paychecks and approve the time cards. 
B) Records for all terminated employees should be destroyed to prevent this type of fraud. 
C) The person committing this type of fraud is generally the CEO or CFO of the company. 
D) This type of fraud often results from the continuance of an employee on the payroll after the employee has been terminated.

Question 4

Discuss three important differences between the payroll and personnel cycle and other cycles in a typical audit.

Accepted Answer

Three important differences between the

Question 5

An analytical procedure to determine a possible misstatement of commission expense is to compare commission expense to salaries payable.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

Stock-based compensation plans may increase the inherent risks related to the accounting and disclosure requirements.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following best describes effective internal control over payroll?

Accepted Answer

A) The preparation of the payroll must be under the control of the personnel department. 
B) The confidentiality of employee payroll data should be carefully protected to prevent fraud. 
C) The duties of hiring, payroll computation, and payment to employees should be segregated. 
D) The payment of cash to employees should be replaced with payment by checks. 
A) The preparation of the payroll must be under the control of the personnel department. 
B) The confidentiality of employee payroll data should be carefully protected to prevent fraud. 
C) The duties of hiring, payroll computation, and payment to employees should be segregated. 
D) The payment of cash to employees should be replaced with payment by checks.

Question 10

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 11

Which of the following types of audit tests is usually emphasized due to a lack of independent third-party evidence related to payroll transactions?

Accepted Answer

A) Analytical procedures 
B) Tests of details of balances 
C) Tests of controls 
D) Each of the above is emphasized. 
A) Analytical procedures 
B) Tests of details of balances 
C) Tests of controls 
D) Each of the above is emphasized.

Question 12

The total of the individual employee earnings in the payroll master file should equal the total:

Accepted Answer

A) balance of gross payroll in general ledger accounts. 
B) of the checks drawn to employees for payroll. 
C) gross payroll plus the total contributed by the employer for payroll taxes. 
D) gross pay for the current week's payroll. 
A) balance of gross payroll in general ledger accounts. 
B) of the checks drawn to employees for payroll. 
C) gross payroll plus the total contributed by the employer for payroll taxes. 
D) gross pay for the current week's payroll.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

When the auditor compares the cancelled check or direct deposit with the payroll journal for amount, they are concerned with the transaction-related audit objective of:

Accepted Answer

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

Question 15

The auditor, in auditing payroll, 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

Question 16

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 
B) Human Resources 
C) Treasury 
D) Controller 
A) General Accounting 
B) Human Resources 
C) Treasury 
D) Controller

Question 17

How do auditors commonly verify sales commission expense?

Accepted Answer

If all employees receive the same commis

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

What potential problems may arise when an auditor considers the relationship between payroll and inventory valuation?

Accepted Answer

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

Exam 20: Audit of the Payroll and Personnel Cycle

The computer file used for recording payroll transactions for each employee and maintaining total wages paid for the year to date is the:

Records that include data about employees such as employment date, performance ratings and pay rates are the:

Which of the following is an accurate statement regarding nonexistent employees?

Discuss three important differences between the payroll and personnel cycle and other cycles in a typical audit.

An analytical procedure to determine a possible misstatement of commission expense is to compare commission expense to salaries payable.

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

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

Stock-based compensation plans may increase the inherent risks related to the accounting and disclosure requirements.

Which of the following best describes effective internal control over payroll?

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.

Which of the following types of audit tests is usually emphasized due to a lack of independent third-party evidence related to payroll transactions?

The total of the individual employee earnings in the payroll master file should equal the total:

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

When the auditor compares the cancelled check or direct deposit with the payroll journal for amount, they are concerned with the transaction-related audit objective of:

The auditor, in auditing payroll, 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?

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

How do auditors commonly verify sales commission expense?

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

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

What potential problems may arise when an auditor considers the relationship between payroll and inventory valuation?

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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