Exam 20: Audit of the Payroll and Personnel Cycle

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

To minimize the opportunity for fraud, unclaimed salary checks should be

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

The human resources department is not considered to be an independent source for the internal verification of wage information.

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.

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

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

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

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

There are several key internal controls over the payment of payroll function that should be present. For example, the payroll should be distributed by someone who is not involved in the other payroll functions. Discuss other key internal controls over the payment of payroll function as it relates to the physical control over assets and records.

Discuss the procedures involved in, and the purpose of a surprise payroll payoff.

A surprise payroll payoff in which employees must pick-up and sign for their pay check is one means of

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 is an accurate statement regarding nonexistent employees?

Which of the following audit procedures would be the most effective in testing for nonexistent employees?

There is inherent risk of payroll fraud because most transactions involve

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

The payroll and personnel cycle ends with which of the following events?

Auditors must understand the business functions and documents and record for the payroll and personnel cycle before they can assess control risk and design test of controls and substantive tests of transactions.