Exam 21: Audit of the Payroll and Personnel Cycle

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

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?

Match seven of the terms for documents and records (a-k)used in the payroll and personnel cycle with the descriptions provided below (1-7): a.Human resource recordsb.Deduction authorization form c.Rate authorization form d.Time record e.Job time ticket f.Summary payroll report g.Payroll check h.W-2 form i.Payroll tax returns j.Payroll journal k.Payroll master file ________ 1.A file used for recording payroll transactions for each employee and maintaining total employee wages paid for the year to date. ________ 2.A document indicating the time the hourly employee started and stopped working. ________ 3.A document written in exchange for services received from an employee. ________ 4.Forms submitted to local,state,and federal units of government for the payment of withheld taxes and the employer's tax. ________ 5.A form authorizing payroll deductions,including the number of exemptions for withholding of income taxes,U.S.savings bonds,and union dues. ________ 6.A form used to authorize the amount of pay. ________ 7.Records including date of employment,personnel investigations,rates of pay,etc.

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

Hiring personnel initiates the payroll and personnel cycle.

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.

The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges.The most important control in the timely preparation of these returns is:

Discuss the two circumstances under which auditors would extend their procedures considerably in the audit of payroll.

When performing the tests of details of balances for expense accounts,________ is (are)generally not necessary.

For good internal control,the payroll function should be independent of the human resources department.

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

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?

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

An auditor traces a sample of electronic time cards before and after the bi-weekly payroll report and then traces to the payroll master file to determine that payroll transactions are reported in the correct period.The auditor is gathering evidence for which audit objective?

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 best describes effective internal control over payroll?

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:

The ________ has the responsibility for approving the number of hours worked for each employee.

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

Firing personnel terminates the payroll and personnel cycle.