Question 1

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 time clock 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 time clock punch cards.

Question 2

In the substantive audit procedures for payroll where the control risk is set at low,an auditor most likely would

Accepted Answer

A)  verify that checks representing unclaimed wages are mailed. 
B)  trace individual employee deductions to entity journal entries. 
C)  observe entity employees during a payroll distribution. 
D)  compare payroll costs with entity standards or budgets. 
A)  verify that checks representing unclaimed wages are mailed. 
B)  trace individual employee deductions to entity journal entries. 
C)  observe entity employees during a payroll distribution. 
D)  compare payroll costs with entity standards or budgets.

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)Te

Question 4

An auditor most likely would assess control risk at high if the payroll department supervisor is responsible for

Accepted Answer

A)  examining authorization forms for new employees. 
B)  comparing payroll registers with original batch transmittal data. 
C)  authorizing payroll rate changes for all employees. 
D)  hiring all subordinate payroll department employees.
AICPA: BB Industry
AICPA: FN Risk Analysis
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A)  examining authorization forms for new employees. 
B)  comparing payroll registers with original batch transmittal data. 
C)  authorizing payroll rate changes for all employees. 
D)  hiring all subordinate payroll department employees.
AICPA: BB Industry
AICPA: FN Risk Analysis
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Question 5

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.
AICPA: BB Industry
AICPA: FN Decision Making
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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.
AICPA: BB Industry
AICPA: FN Decision Making
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Question 6

During the current year being audited,Hitech,Inc.changed from a conventional payroll punch clock to a computerized payroll time system.Factory employees now record time in and out with magnetic cards and the IT system automatically updates all payroll records.Because of this change

Accepted Answer

A)  the auditor must audit through the computer. 
B)  internal control has improved. 
C)  without paper clock cards, part of the audit trail has been altered. 
D)  the potential for payroll related fraud has been diminished. 
A)  the auditor must audit through the computer. 
B)  internal control has improved. 
C)  without paper clock cards, part of the audit trail has been altered. 
D)  the potential for payroll related fraud has been diminished.

Question 7

Payroll-related expenses normally are not a material cost to the organization.

Accepted Answer

A) True 
 B)False

Question 8

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

Accepted Answer

A) True 
 B)False

Question 9

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 10

For each of the following tests,identify the assertion to which the test applies.
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)Occurrence.
2)Accuracy.
3)Ri

Question 11

Which of the following could test the assertion of cutoff 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 classification 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 classification as short-or long-term.

Question 12

The payroll-processing function is responsible for paying employees for services and benefits.

Accepted Answer

A) True 
 B)False

Question 13

Give an example of a test of controls that could be used by an auditor to test for the following assertions: Occurrence,Accuracy,and Cutoff.

Accepted Answer

Possible answers:
Occurrence-The auditor

Question 14

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 15

Which of the following is the best reason why an auditor should consider observing an entity'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

Which of the following procedures would normally be performed by the auditor when conducting tests of payroll transactions?

Accepted Answer

A)  Interview employees selected in a statistical sample of payroll transactions. 
B)  Vouch number of hours worked as shown on payroll to time sheets and time reports signed by the foreman. 
C)  Confirm amounts withheld from employees' salaries with proper governmental authorities. 
D)  Examine signatures on paid salary checks. 
A)  Interview employees selected in a statistical sample of payroll transactions. 
B)  Vouch number of hours worked as shown on payroll to time sheets and time reports signed by the foreman. 
C)  Confirm amounts withheld from employees' salaries with proper governmental authorities. 
D)  Examine signatures on paid salary checks.

Question 17

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except:

Accepted Answer

A)  payments to fictitious employees. 
B)  payments to terminated employees. 
C)  payments to valid employees who have not worked. 
D)  payments to valid employees at a rate in excess of the authorized amount.
AICPA: BB Industry
AICPA: FN Decision Making
Accessibility: Keyboard Navigation 
A)  payments to fictitious employees. 
B)  payments to terminated employees. 
C)  payments to valid employees who have not worked. 
D)  payments to valid employees at a rate in excess of the authorized amount.
AICPA: BB Industry
AICPA: FN Decision Making
Accessibility: Keyboard Navigation

Question 18

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 19

Comparing amounts selected from the payroll account analysis for payroll accruals to supporting documentation would provide evidence primarily for which assertion?

Accepted Answer

A)  Completeness. 
B)  Existence. 
C)  Classification. 
D)  Presentation and disclosure. 
A)  Completeness. 
B)  Existence. 
C)  Classification. 
D)  Presentation and disclosure.

Question 20

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.

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

In the substantive audit procedures for payroll where the control risk is set at low,an auditor most likely would

An auditor most likely would assess control risk at high if the payroll department supervisor is responsible for

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?

During the current year being audited,Hitech,Inc.changed from a conventional payroll punch clock to a computerized payroll time system.Factory employees now record time in and out with magnetic cards and the IT system automatically updates all payroll records.Because of this change

Payroll-related expenses normally are not a material cost to the organization.

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

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

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

The payroll-processing function is responsible for paying employees for services and benefits.

Give an example of a test of controls that could be used by an auditor to test for the following assertions: Occurrence,Accuracy,and Cutoff.

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

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

Which of the following procedures would normally be performed by the auditor when conducting tests of payroll transactions?

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except:

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.

Comparing amounts selected from the payroll account analysis for payroll accruals to supporting documentation 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?

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 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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters

Exam 12: Auditing the Human Resource Management Process

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

In the substantive audit procedures for payroll where the control risk is set at low,an auditor most likely would

An auditor most likely would assess control risk at high if the payroll department supervisor is responsible for

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?

During the current year being audited,Hitech,Inc.changed from a conventional payroll punch clock to a computerized payroll time system.Factory employees now record time in and out with magnetic cards and the IT system automatically updates all payroll records.Because of this change

Payroll-related expenses normally are not a material cost to the organization.

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

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

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

The payroll-processing function is responsible for paying employees for services and benefits.

Give an example of a test of controls that could be used by an auditor to test for the following assertions: Occurrence,Accuracy,and Cutoff.

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

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

Which of the following procedures would normally be performed by the auditor when conducting tests of payroll transactions?

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except:

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.

Comparing amounts selected from the payroll account analysis for payroll accruals to supporting documentation 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?

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 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

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters