Question 1

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

Question 2

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 3

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

Accepted Answer

A)  identifying employees who do not have proper work credentials. 
B)  establishing a tightly controlled, fraud-free work environment. 
C)  testing for nonexistent employees. 
D)  identifying employees who have not submitted proper W-2 forms. 
A)  identifying employees who do not have proper work credentials. 
B)  establishing a tightly controlled, fraud-free work environment. 
C)  testing for nonexistent employees. 
D)  identifying employees who have not submitted proper W-2 forms.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Most monetary misstatements of payroll are corrected by internal verification controls or by the PCAOB.

Accepted Answer

A) True 
 B)False

Question 6

An auditor is verifying that the recorded payroll payments are for work actually performed by existing employees,the occurrence transaction-related audit objective.List three key internal controls that a company should have in place in this area.

Accepted Answer

•Time records are approved by the superv

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements about the payroll and personnel cycle is correct?

Accepted Answer

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

Question 9

For proper internal control,the person(s)responsible for signing the payroll checks should not have access to timekeeping or be otherwise involved in the preparation of payroll.

Accepted Answer

A) True 
 B)False

Question 10

Imprest accounts usually carry a significant balance.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  redeposited. 
B)  kept in the payroll department. 
C)  left with the employee's supervisor. 
D)  held for the employee in the personnel department. 
A)  redeposited. 
B)  kept in the payroll department. 
C)  left with the employee's supervisor. 
D)  held for the employee in the personnel department.

Question 12

Which of the following statements is false?

Accepted Answer

A)  The payroll cycle consists of one class of transactions. 
B)  Balance sheet accounts related to payroll are generally more significant than related transactions. 
C)  Internal controls over payroll are effective for most companies. 
D)  Small companies usually have effective controls over payroll. 
A)  The payroll cycle consists of one class of transactions. 
B)  Balance sheet accounts related to payroll are generally more significant than related transactions. 
C)  Internal controls over payroll are effective for most companies. 
D)  Small companies usually have effective controls over payroll.

Question 13

It is generally more difficult for the auditor to detect payment of fraudulent hours than payment of fictitious employees.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A)  Trace transactions recorded in the payroll journal to the human resources department to determine employment status. 
B)  Examine cancelled checks for proper endorsement. 
C)  Recalculate net pay. 
D)  Reconcile the disbursements in the payroll journal with the disbursements on the payroll bank statement. 
A)  Trace transactions recorded in the payroll journal to the human resources department to determine employment status. 
B)  Examine cancelled checks for proper endorsement. 
C)  Recalculate net pay. 
D)  Reconcile the disbursements in the payroll journal with the disbursements on the payroll bank statement.

Question 16

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 17

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 18

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.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 21: Audit of the Payroll and Personnel Cycle

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

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

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

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

Most monetary misstatements of payroll are corrected by internal verification controls or by the PCAOB.

An auditor is verifying that the recorded payroll payments are for work actually performed by existing employees,the occurrence transaction-related audit objective.List three key internal controls that a company should have in place in this area.

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

Which of the following statements about the payroll and personnel cycle is correct?

For proper internal control,the person(s)responsible for signing the payroll checks should not have access to timekeeping or be otherwise involved in the preparation of payroll.

Imprest accounts usually carry a significant balance.

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

Which of the following statements is false?

It is generally more difficult for the auditor to detect payment of fraudulent hours than payment of fictitious employees.

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

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

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

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

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

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

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

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan 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

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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