Question 1

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?

Accepted Answer

A)  Payroll transactions are properly disclosed. 
B)  Recorded payroll transactions are valid. 
C)  Payroll transactions are recorded in the appropriate time period. 
D)  All payroll transactions have been recorded. 
A)  Payroll transactions are properly disclosed. 
B)  Recorded payroll transactions are valid. 
C)  Payroll transactions are recorded in the appropriate time period. 
D)  All payroll transactions have been recorded.

Question 2

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 3

The human resource function is responsible for managing the personnel needs of the organization.

Accepted Answer

A) True 
 B)False

Question 4

Listed below are descriptions of various types of documents used in the payroll process.Identify the document being described for each of the following
1)The document used to record hours worked by an employee.
2)The document that summarizes all payroll payments issued to employees.
3)The document that contains information on an employee's work history.
4)The form used to authorize deductions from an employee's pay.
5)The computer file that contains all the entity's records related to payroll.

Accepted Answer

1)Time card/time she

Question 5

Transactions processed through the payroll process include all of the following except:

Accepted Answer

A)  Payments to employees for services rendered. 
B)  Payments to independent contractors for services rendered. 
C)  Accrual of social security taxes. 
D)  Payment of unemployment taxes. 
A)  Payments to employees for services rendered. 
B)  Payments to independent contractors for services rendered. 
C)  Accrual of social security taxes. 
D)  Payment of unemployment taxes.

Question 6

Tracing a sample of time cards before and after period end to the weekly payroll report and tracing the weekly payroll report to the general ledger to verify that payroll transactions are recorded in the proper period would provide evidence primarily for which assertion?

Accepted Answer

A)  Classification. 
B)  Occurrence. 
C)  Cutoff. 
D)  Valuation. 
A)  Classification. 
B)  Occurrence. 
C)  Cutoff. 
D)  Valuation.

Question 7

Brownstein,CPA,has been engaged to audit the financial statements of Young Computer Outlets,Inc.,a new client.Young is a privately owned chain of retail stores that sells a variety of computer software and video products.Young uses an in-house payroll department at its corporate headquarters to compute payroll data and to prepare and distribute payroll checks to its 300 salaried employees.Brownstein is preparing an internal control questionnaire to assist in obtaining an understanding of Young's internal control and in setting control risk. Prepare a "Payroll" segment of Brownstein's internal control questionnaire that would assist in obtaining an understanding of Young's internal control and for setting the client's control risk.Do not prepare questions relating to cash payroll,IT applications,or payments based on hourly rates,piecework,commissions,employee benefits (pensions,health care,vacations,and so on),or payroll tax accruals other than withholdings.Use the following format:
$\begin{array}{c}
\text {Young Computer Outlets}\
 \text {Internal Control Questionnaire }\
\text {Payroll}\
\\begin{array}{|l|l|l|}

\hline {\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Question }} & \text { Yes } & \text { No } \
\hline \begin{array}{l}
\text { 1. Are payroll changes (hires, separations, salary changes, } \
\text { overtime, bonuses, promotions, etc.) properly authorized and } \
\text { approved? }\
\end{array} & &\\hline 
\end{array}\end{array}$

Accepted Answer

11EA782B_356E_01FE_B

Question 8

Which of the following internal control activities most likely would prevent direct labor hours from being charged to manufacturing overhead?

Accepted Answer

A)  Periodic independent counts of work-in-process for comparison to recorded amounts. 
B)  Comparison of daily journal entries with approved production orders. 
C)  Use of time tickets to record actual labor worked on production orders. 
D)  Reconciliation of work-in-process inventory with periodic cost budgets. 
A)  Periodic independent counts of work-in-process for comparison to recorded amounts. 
B)  Comparison of daily journal entries with approved production orders. 
C)  Use of time tickets to record actual labor worked on production orders. 
D)  Reconciliation of work-in-process inventory with periodic cost budgets.

Question 9

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 10

Which of the following is the best way for an auditor to determine that every name on a company's payroll is that of a bona fide employee presently on the job?

Accepted Answer

A)  Examine personnel records for accuracy and completeness. 
B)  Examine employees' names listed on payroll accounting records. 
C)  Make a surprise observation of the company's regular distribution of paychecks. 
D)  Visit the working areas and confirm with employees their badge or identification numbers. 
A)  Examine personnel records for accuracy and completeness. 
B)  Examine employees' names listed on payroll accounting records. 
C)  Make a surprise observation of the company's regular distribution of paychecks. 
D)  Visit the working areas and confirm with employees their badge or identification numbers.

Question 11

When control risk is assessed as low for assertions related to payroll,substantive tests of payroll balances most likely would be limited to applying substantive analytical procedures and

Accepted Answer

A)  Observing the distribution of paychecks. 
B)  Footing and crossfooting the payroll register. 
C)  Inspecting payroll tax returns. 
D)  Recalculating payroll accruals. 
A)  Observing the distribution of paychecks. 
B)  Footing and crossfooting the payroll register. 
C)  Inspecting payroll tax returns. 
D)  Recalculating payroll accruals.

Question 12

A surprise observation by an auditor of a client'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 13

An effective system of internal control over the payroll function would include

Accepted Answer

A)  Verification of agreement of job time tickets with employee clock card hours by a payroll department employee. 
B)  Reconciliation of totals on job time tickets with job reports by employees responsible for those specific jobs. 
C)  Custody of rate authorization records by the supervisor of the payroll department. 
D)  Preparation of payroll transaction journal entries by an employee who reports to the supervisor of the human resource department. 
A)  Verification of agreement of job time tickets with employee clock card hours by a payroll department employee. 
B)  Reconciliation of totals on job time tickets with job reports by employees responsible for those specific jobs. 
C)  Custody of rate authorization records by the supervisor of the payroll department. 
D)  Preparation of payroll transaction journal entries by an employee who reports to the supervisor of the human resource department.

Question 14

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Accepted Answer

A)  Human resource. 
B)  Treasurer. 
C)  Controller. 
D)  Payroll. 
A)  Human resource. 
B)  Treasurer. 
C)  Controller. 
D)  Payroll.

Question 15

Which of the following is the best reason why an auditor should consider observing a client's distribution of regular payroll checks?

Accepted Answer

A)  To ensure that names on the company payroll are those of bona fide employees presently on the job. 
B)  Total payroll costs are a significant part of total operating costs. 
C)  The auditor did not observe the distribution of the entire regular payroll during the audit in the prior year. 
D)  Employee turnover is excessive. 
A)  To ensure that names on the company payroll are those of bona fide employees presently on the job. 
B)  Total payroll costs are a significant part of total operating costs. 
C)  The auditor did not observe the distribution of the entire regular payroll during the audit in the prior year. 
D)  Employee turnover is excessive.

Question 16

In an IT payroll system environment,an auditor would be least likely to use test data to test controls related to

Accepted Answer

A)  Missing employee numbers. 
B)  Proper approval of overtime by supervisors. 
C)  Time cards with invalid job numbers. 
D)  Agreement of hours per clock cards with hours on time cards. 
A)  Missing employee numbers. 
B)  Proper approval of overtime by supervisors. 
C)  Time cards with invalid job numbers. 
D)  Agreement of hours per clock cards with hours on time cards.

Question 17

Explain how the human resource management process can affect the financial statements.

Accepted Answer

The main human resource transaction that

Question 18

Comparing selected items from the payroll register to employee time records that have been approved by supervisory personnel tests which of the following assertions for payroll expense?

Accepted Answer

A)  Occurrence. 
B)  Completeness. 
C)  Authorization. 
D)  Cutoff. 
A)  Occurrence. 
B)  Completeness. 
C)  Authorization. 
D)  Cutoff.

Question 19

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 20

Tests of details of transactions are often conducted in conjunction with tests of controls.

Accepted Answer

A) True 
 B)False

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?

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

The human resource function is responsible for managing the personnel needs of the organization.

Transactions processed through the payroll process include all of the following except:

Tracing a sample of time cards before and after period end to the weekly payroll report and tracing the weekly payroll report to the general ledger to verify that payroll transactions are recorded in the proper period would provide evidence primarily for which assertion?

Which of the following internal control activities most likely would prevent direct labor hours from being charged to manufacturing overhead?

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 the best way for an auditor to determine that every name on a company's payroll is that of a bona fide employee presently on the job?

When control risk is assessed as low for assertions related to payroll,substantive tests of payroll balances most likely would be limited to applying substantive analytical procedures and

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

An effective system of internal control over the payroll function would include

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Which of the following is the best reason why an auditor should consider observing a client's distribution of regular payroll checks?

In an IT payroll system environment,an auditor would be least likely to use test data to test controls related to

Explain how the human resource management process can affect the financial statements.

Comparing selected items from the payroll register to employee time records that have been approved by supervisory personnel tests which of the following assertions for payroll expense?

All of the following are incorporated into valuation models except:

Tests of details of transactions are often conducted in conjunction with tests of controls.

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

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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 internal control objectives is likely to be a larger concern in the audit of the payroll cycle?

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

The human resource function is responsible for managing the personnel needs of the organization.

Transactions processed through the payroll process include all of the following except:

Tracing a sample of time cards before and after period end to the weekly payroll report and tracing the weekly payroll report to the general ledger to verify that payroll transactions are recorded in the proper period would provide evidence primarily for which assertion?

Which of the following internal control activities most likely would prevent direct labor hours from being charged to manufacturing overhead?

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 the best way for an auditor to determine that every name on a company's payroll is that of a bona fide employee presently on the job?

When control risk is assessed as low for assertions related to payroll,substantive tests of payroll balances most likely would be limited to applying substantive analytical procedures and

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

An effective system of internal control over the payroll function would include

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Which of the following is the best reason why an auditor should consider observing a client's distribution of regular payroll checks?

In an IT payroll system environment,an auditor would be least likely to use test data to test controls related to

Explain how the human resource management process can affect the financial statements.

Comparing selected items from the payroll register to employee time records that have been approved by supervisory personnel tests which of the following assertions for payroll expense?

All of the following are incorporated into valuation models except:

Tests of details of transactions are often conducted in conjunction with tests of controls.

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

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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

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