Question 1

Which of the following activities most likely would detect whether payroll data are accurately processed?

Accepted Answer

A)  Monitor authorized distribution of data control sheets. 
B)  Use test data to verify the accurate performance of payroll processing. 
C)  Examine source documents for approval by supervisors. 
D)  Segregate duties between approval of hardware and software specifications. 
A)  Monitor authorized distribution of data control sheets. 
B)  Use test data to verify the accurate performance of payroll processing. 
C)  Examine source documents for approval by supervisors. 
D)  Segregate duties between approval of hardware and software specifications.

Question 2

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

Accepted Answer

A) True 
 B)False

Question 3

Identify whether the following tests are substantive analytical procedures, tests of details of transactions, or tests of details of account balances.
1) Trace a sample of payroll checks to the master employee list to verify occurrence.
2) Recalculate the mathematical accuracy of a sample of payroll checks.
3) Test a sample of bank reconciliations for the payroll bank account.
4) Estimate sales commissions by applying commission formulas to recorded sales totals.
5) Compare amounts accrued to supporting documentation, such as payroll tax returns.
6) Compare payroll costs as a percentage of sales to industry data.

Accepted Answer

1) Tests of details of transactions.
2)

Question 4

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?

Accepted Answer

A)  There are significant unexplained variances between standard and actual labor cost. 
B)  Payroll checks are disbursed by the same employee each payday. 
C)  Employee time sheets are approved by individual departmental supervisors. 
D)  A separate payroll bank account is maintained on an imprest basis. 
A)  There are significant unexplained variances between standard and actual labor cost. 
B)  Payroll checks are disbursed by the same employee each payday. 
C)  Employee time sheets are approved by individual departmental supervisors. 
D)  A separate payroll bank account is maintained on an imprest basis.

Question 5

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

Accepted Answer

A) True 
 B)False

Question 6

A CPA reviews an entity's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for

Accepted Answer

A)  Distributing payroll checks to employees. 
B)  Reviewing and approving time reports for subordinate employees. 
C)  Hiring subordinate employees. 
D)  Initiating requests for salary adjustments for subordinate employees. 
A)  Distributing payroll checks to employees. 
B)  Reviewing and approving time reports for subordinate employees. 
C)  Hiring subordinate employees. 
D)  Initiating requests for salary adjustments for subordinate employees.

Question 7

If the results of the control tests do not support the planned level of control risk, the detection risk will have to be set higher.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following internal control activities could best prevent direct labor from being charged to manufacturing overhead?

Accepted Answer

A)  Reconciliation of work in process inventory with cost records. 
B)  Comparison of daily journal entries with the factory labor summary. 
C)  Comparison of period costs budgets and time sheets. 
D)  Reconciliation of the unfinished job summary and production cost records. 
A)  Reconciliation of work in process inventory with cost records. 
B)  Comparison of daily journal entries with the factory labor summary. 
C)  Comparison of period costs budgets and time sheets. 
D)  Reconciliation of the unfinished job summary and production cost records.

Question 9

In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and

Accepted Answer

A)  Observe the segregation of duties concerning human resource responsibilities and payroll disbursement. 
B)  Inspect evidence that all prenumbered payroll checks are accounted for. 
C)  Recompute the payroll deductions for employee fringe benefits. 
D)  Verify the preparation of the monthly payroll account bank reconciliation. 
A)  Observe the segregation of duties concerning human resource responsibilities and payroll disbursement. 
B)  Inspect evidence that all prenumbered payroll checks are accounted for. 
C)  Recompute the payroll deductions for employee fringe benefits. 
D)  Verify the preparation of the monthly payroll account bank reconciliation.

Question 10

In testing the payroll of a large company, the auditor wants to establish that the individuals included in a sample actually were employees of the company during the period under review. What will be the best source to determine this?

Accepted Answer

A)  Telephone contacts with the employees. 
B)  Tracing from the payroll register to the employee's earnings records. 
C)  Confirmation with the union or other independent organization. 
D)  Examination of Human Resource Department records. 
A)  Telephone contacts with the employees. 
B)  Tracing from the payroll register to the employee's earnings records. 
C)  Confirmation with the union or other independent organization. 
D)  Examination of Human Resource Department records.

Question 11

Which of the following could test the assertion of classification for payroll-related liabilities?

Accepted Answer

A)  Compare items in accrued payroll taxes to the supporting payroll tax return. 
B)  Search for unrecorded liabilities. 
C)  Examine payroll tax returns to determine that the expense was recorded in the proper period. 
D)  Review payroll liabilities for proper reporting as short- or long-term. 
A)  Compare items in accrued payroll taxes to the supporting payroll tax return. 
B)  Search for unrecorded liabilities. 
C)  Examine payroll tax returns to determine that the expense was recorded in the proper period. 
D)  Review payroll liabilities for proper reporting as short- or long-term.

Question 12

A large retail enterprise has established a policy that requires that the paymaster deliver all unclaimed payroll checks to the Internal Auditing Department at the end of each payroll distribution day. This policy was most likely adopted in order to

Accepted Answer

A)  Assure that employees who were absent on a payroll distribution day are not paid for that day. 
B)  Prevent the paymaster from cashing checks that are unclaimed for several weeks. 
C)  Prevent a bona fide employee's check from being claimed by another employee. 
D)  Detect any fictitious employee who may have been placed on the payroll. 
A)  Assure that employees who were absent on a payroll distribution day are not paid for that day. 
B)  Prevent the paymaster from cashing checks that are unclaimed for several weeks. 
C)  Prevent a bona fide employee's check from being claimed by another employee. 
D)  Detect any fictitious employee who may have been placed on the payroll.

Question 13

Which of the following is an effective internal control used to prove that production department employees are properly validating payroll timecards at a time-recording station?

Accepted Answer

A)  Timecards should be carefully inspected by those persons who distribute pay envelopes to the employees. 
B)  One person should be responsible for maintaining records of employee time for which salary payment is not to be made. 
C)  Daily reports showing time charged to jobs should be approved by the foreman and compared to the total hours worked on the employee timecards. 
D)  Internal auditors should make observations of distribution of paychecks on a surprise basis. 
A)  Timecards should be carefully inspected by those persons who distribute pay envelopes to the employees. 
B)  One person should be responsible for maintaining records of employee time for which salary payment is not to be made. 
C)  Daily reports showing time charged to jobs should be approved by the foreman and compared to the total hours worked on the employee timecards. 
D)  Internal auditors should make observations of distribution of paychecks on a surprise basis.

Question 14

Which of the following is required of an auditor who is testing the fair value of options in share-based compensation?

Accepted Answer

A)  Using a specialist. 
B)  Testing the inputs used in the valuation model. 
C)  Becoming an expert in option-pricing. 
D)  Using the work of the internal audit function. 
A)  Using a specialist. 
B)  Testing the inputs used in the valuation model. 
C)  Becoming an expert in option-pricing. 
D)  Using the work of the internal audit function.

Question 15

All of the following are incorporated into valuation models except:

Accepted Answer

A)  The exercise price of the option. 
B)  The term of the option. 
C)  Expected dividends. 
D)  Current tax rates. 
A)  The exercise price of the option. 
B)  The term of the option. 
C)  Expected dividends. 
D)  Current tax rates.

Question 16

A substantive test of transactions to test the completeness assertion includes

Accepted Answer

A)  Tracing a sample of time sheets to the payroll register. 
B)  Testing a sample of payroll checks for the presence of an authorized time sheet. 
C)  Testing postings to the payroll register for a sample of payroll checks. 
D)  Recomputing the accuracy of a sample of payroll checks. 
A)  Tracing a sample of time sheets to the payroll register. 
B)  Testing a sample of payroll checks for the presence of an authorized time sheet. 
C)  Testing postings to the payroll register for a sample of payroll checks. 
D)  Recomputing the accuracy of a sample of payroll checks.

Question 17

Effective internal control over unclaimed payroll checks that are kept by the Treasury Department would include Accounting Department procedures that require

Accepted Answer

A)  Effective cancellation and stop payment orders for checks representing unclaimed wages. 
B)  Redepositing unclaimed wages after a period of 3 months. 
C)  Accounting for all unclaimed wages in a current liability account. 
D)  Periodic accounting for the actual checks representing unclaimed wages. 
A)  Effective cancellation and stop payment orders for checks representing unclaimed wages. 
B)  Redepositing unclaimed wages after a period of 3 months. 
C)  Accounting for all unclaimed wages in a current liability account. 
D)  Periodic accounting for the actual checks representing unclaimed wages.

Question 18

A surprise observation by an auditor of an entity's regular distribution of paychecks is primarily designed to satisfy the auditor that

Accepted Answer

A)  All unclaimed payroll checks are properly returned to the cashier. 
B)  The paymaster is not involved in the distribution of payroll checks. 
C)  All employees have in their possession proper employee identification. 
D)  Names on the company payroll are those of bona fide employees presently on the job. 
A)  All unclaimed payroll checks are properly returned to the cashier. 
B)  The paymaster is not involved in the distribution of payroll checks. 
C)  All employees have in their possession proper employee identification. 
D)  Names on the company payroll are those of bona fide employees presently on the job.

Question 19

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the

Accepted Answer

A)  Administrative controls from the internal accounting controls. 
B)  Human resources function from the controllership function. 
C)  Operational responsibility from the record-keeping responsibility. 
D)  Authorization of transactions from the custody of related assets. 
A)  Administrative controls from the internal accounting controls. 
B)  Human resources function from the controllership function. 
C)  Operational responsibility from the record-keeping responsibility. 
D)  Authorization of transactions from the custody of related assets.

Question 20

Effective internal control over the payroll function would include which of the following?

Accepted Answer

A)  Total time recorded on time-clock punch cards should be reconciled to job reports by employees responsible for those specific jobs. 
B)  Payroll Department employees should be supervised by the management of the Human Resource Department. 
C)  Payroll Department employees should be responsible for maintaining employee personnel records. 
D)  Total time spent on jobs should be compared with total time indicated on timeclock punch cards. 
A)  Total time recorded on time-clock punch cards should be reconciled to job reports by employees responsible for those specific jobs. 
B)  Payroll Department employees should be supervised by the management of the Human Resource Department. 
C)  Payroll Department employees should be responsible for maintaining employee personnel records. 
D)  Total time spent on jobs should be compared with total time indicated on timeclock punch cards.

Which of the following activities most likely would detect whether payroll data are accurately processed?

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

A CPA reviews an entity's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for

If the results of the control tests do not support the planned level of control risk, the detection risk will have to be set higher.

Which of the following internal control activities could best prevent direct labor from being charged to manufacturing overhead?

In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and

In testing the payroll of a large company, the auditor wants to establish that the individuals included in a sample actually were employees of the company during the period under review. What will be the best source to determine this?

Which of the following could test the assertion of classification for payroll-related liabilities?

A large retail enterprise has established a policy that requires that the paymaster deliver all unclaimed payroll checks to the Internal Auditing Department at the end of each payroll distribution day. This policy was most likely adopted in order to

Which of the following is an effective internal control used to prove that production department employees are properly validating payroll timecards at a time-recording station?

Which of the following is required of an auditor who is testing the fair value of options in share-based compensation?

All of the following are incorporated into valuation models except:

A substantive test of transactions to test the completeness assertion includes

Effective internal control over unclaimed payroll checks that are kept by the Treasury Department would include Accounting Department procedures that require

A surprise observation by an auditor of an entity's regular distribution of paychecks is primarily designed to satisfy the auditor that

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the

Effective internal control over the payroll function would include which of the following?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 12: Auditing the Human Resource Management Process

Which of the following activities most likely would detect whether payroll data are accurately processed?

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

A CPA reviews an entity's payroll procedures. The CPA would consider internal control to be less than effective if a payroll department supervisor was assigned the responsibility for

If the results of the control tests do not support the planned level of control risk, the detection risk will have to be set higher.

Which of the following internal control activities could best prevent direct labor from being charged to manufacturing overhead?

In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and

In testing the payroll of a large company, the auditor wants to establish that the individuals included in a sample actually were employees of the company during the period under review. What will be the best source to determine this?

Which of the following could test the assertion of classification for payroll-related liabilities?

A large retail enterprise has established a policy that requires that the paymaster deliver all unclaimed payroll checks to the Internal Auditing Department at the end of each payroll distribution day. This policy was most likely adopted in order to

Which of the following is an effective internal control used to prove that production department employees are properly validating payroll timecards at a time-recording station?

Which of the following is required of an auditor who is testing the fair value of options in share-based compensation?

All of the following are incorporated into valuation models except:

A substantive test of transactions to test the completeness assertion includes

Effective internal control over unclaimed payroll checks that are kept by the Treasury Department would include Accounting Department procedures that require

A surprise observation by an auditor of an entity's regular distribution of paychecks is primarily designed to satisfy the auditor that

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the

Effective internal control over the payroll function would include which of the following?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters