Question 1

In the area of payroll, which of the following procedures represents proper control over the custody of assets?

Accepted Answer

A)  The supervisor receives a copy of the payroll register for a chance to approve the payroll after it is completed. 
B)  Individual paycheques are prepared. 
C)  Unclaimed payroll cheques are held in the office of the chief financial officer. 
D)  Signatures from employees are obtained for calculation of deductions. 
A)  The supervisor receives a copy of the payroll register for a chance to approve the payroll after it is completed. 
B)  Individual paycheques are prepared. 
C)  Unclaimed payroll cheques are held in the office of the chief financial officer. 
D)  Signatures from employees are obtained for calculation of deductions.

Question 2

Small Corporation uses a Wages Clearing Account for its payroll disbursements. At the end of February, a reasonably large debit balance remained in this account. What is the most likely reason?

Accepted Answer

A)  More labour cost had been assigned to the expense accounts than had been paid. 
B)  Some labour cost had not been properly classified in the expense accounts. 
C)  Some employees had not yet cashed their cheques. 
D)  Not enough cash had been transferred to the bank account. 
A)  More labour cost had been assigned to the expense accounts than had been paid. 
B)  Some labour cost had not been properly classified in the expense accounts. 
C)  Some employees had not yet cashed their cheques. 
D)  Not enough cash had been transferred to the bank account.

Question 3

Selecting a sample of job orders from the job cost summary and matching them to bills of material and the schedule of production labour requirements is a procedure designed to test the control objective of ________.

Accepted Answer

A)  accounting 
B)  accuracy 
C)  completeness 
D)  validity 
A)  accounting 
B)  accuracy 
C)  completeness 
D)  validity

Question 4

Most of the transactions in the production cycle are cost accounting allocations, unit cost determinations, and standard cost calculations.

Accepted Answer

A) True 
 B)False

Question 5

The sampling unit in a test of controls relating to the validity of payroll transactions is ordinarily a(n) ________.

Accepted Answer

A)  clock card or time ticket 
B)  employee T-4 form 
C)  employee personnel record 
D)  payroll register entry 
A)  clock card or time ticket 
B)  employee T-4 form 
C)  employee personnel record 
D)  payroll register entry

Question 6

The five functional responsibilities for the payroll cycle are (1) personnel and labour relations, (2) supervision, (3) timekeeping and cost accounting, (4) payroll accounting, and (5) payroll distribution. For each responsibility, identify the type of duty or duties (authorization, custody, record-keeping, periodic reconciliation) associated with the function and briefly describe the activity involved.

Accepted Answer

a. Personnel and labour relations: Autho

Question 7

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?

Accepted Answer

A)  Distributing paycheques. 
B)  Authorizing overtime hours. 
C)  Authorizing the addition or removal of employees from the payroll. 
D)  Collecting and retaining unclaimed paycheques. 
A)  Distributing paycheques. 
B)  Authorizing overtime hours. 
C)  Authorizing the addition or removal of employees from the payroll. 
D)  Collecting and retaining unclaimed paycheques.

Question 8

If auditors compare the gross profit margin by product and compare it with prior periods, this is an example of a(n)

Accepted Answer

A)  Analytical procedure. 
B)  Inspection technique. 
C)  Presentation procedure. 
D)  Scanning technique. 
A)  Analytical procedure. 
B)  Inspection technique. 
C)  Presentation procedure. 
D)  Scanning technique.

Question 9

Which of the following is NOT a major risk in the payroll cycle?

Accepted Answer

A)  Paying fictitious employees. 
B)  Paying employees more than a market wage. 
C)  Overpayment for time or production. 
D)  Incorrect accounting for costs and expenses. 
A)  Paying fictitious employees. 
B)  Paying employees more than a market wage. 
C)  Overpayment for time or production. 
D)  Incorrect accounting for costs and expenses.

Question 10

Describe the major risk areas associated with the payroll cycle.

Accepted Answer

a. Paying fictitious employees (invalid

Question 11

In the audit of payroll, auditors often examine the endorsements on a sample of cancelled payroll cheques. What is the purpose of this procedure?

Accepted Answer

The auditor is looking for indications t

Question 12

A payroll "clearing account" is a temporary account that holds payroll transactions until final accounting entries are prepared.

Accepted Answer

A) True 
 B)False

Question 13

What is a clearing account? What are the risks associated with this type of account?

Accepted Answer

A clearing account is a temporary storag

Question 14

Finished goods inventory is low in inherent risk since production is so well understood.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  Personnel department. 
B)  Treasurer. 
C)  Controller. 
D)  Payroll department. 
A)  Personnel department. 
B)  Treasurer. 
C)  Controller. 
D)  Payroll department.

Question 16

A test of the completeness objective is selecting a sample of payroll register entries and vouching them to employee data in the personnel files such as employee identification, rate of pay, and authorized deductions.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would raise a red flag in the audit of payroll?

Accepted Answer

A)  One person in the company is authorized to sign all payroll cheques. 
B)  The endorsement on a cancelled payroll cheque included the words "for deposit only" above the payee's signature. 
C)  The endorsement on a cancelled payroll cheque included the signature of a supervisor below the signature of the payee. 
D)  A supervisor initialled the time card of an employee. 
A)  One person in the company is authorized to sign all payroll cheques. 
B)  The endorsement on a cancelled payroll cheque included the words "for deposit only" above the payee's signature. 
C)  The endorsement on a cancelled payroll cheque included the signature of a supervisor below the signature of the payee. 
D)  A supervisor initialled the time card of an employee.

Question 18

Production accounting generates important information for management decisions but also is a source of audit risk because ________.

Accepted Answer

A)  production accountants may not be competent 
B)  production processes require a lot of allocations 
C)  goods produced may not be marketable 
D)  goods claimed as produced may not exist 
A)  production accountants may not be competent 
B)  production processes require a lot of allocations 
C)  goods produced may not be marketable 
D)  goods claimed as produced may not exist

Question 19

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.

Accepted Answer

A)  examining authorization forms for new employees 
B)  authorizing payroll rate changes for all employees 
C)  comparing payroll registers with original batch transmittal data 
D)  hiring all subordinate payroll department employees 
A)  examining authorization forms for new employees 
B)  authorizing payroll rate changes for all employees 
C)  comparing payroll registers with original batch transmittal data 
D)  hiring all subordinate payroll department employees

Question 20

Which of the following accounts is not considered in the production cycle?

Accepted Answer

A)  Inventory. 
B)  Cost of goods sold. 
C)  Amortization expense. 
D)  Sales. 
A)  Inventory. 
B)  Cost of goods sold. 
C)  Amortization expense. 
D)  Sales.

In the area of payroll, which of the following procedures represents proper control over the custody of assets?

Small Corporation uses a Wages Clearing Account for its payroll disbursements. At the end of February, a reasonably large debit balance remained in this account. What is the most likely reason?

Selecting a sample of job orders from the job cost summary and matching them to bills of material and the schedule of production labour requirements is a procedure designed to test the control objective of ________.

Most of the transactions in the production cycle are cost accounting allocations, unit cost determinations, and standard cost calculations.

The sampling unit in a test of controls relating to the validity of payroll transactions is ordinarily a(n) ________.

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?

If auditors compare the gross profit margin by product and compare it with prior periods, this is an example of a(n)

Which of the following is NOT a major risk in the payroll cycle?

Describe the major risk areas associated with the payroll cycle.

In the audit of payroll, auditors often examine the endorsements on a sample of cancelled payroll cheques. What is the purpose of this procedure?

A payroll "clearing account" is a temporary account that holds payroll transactions until final accounting entries are prepared.

What is a clearing account? What are the risks associated with this type of account?

Finished goods inventory is low in inherent risk since production is so well understood.

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

A test of the completeness objective is selecting a sample of payroll register entries and vouching them to employee data in the personnel files such as employee identification, rate of pay, and authorized deductions.

Which of the following would raise a red flag in the audit of payroll?

Production accounting generates important information for management decisions but also is a source of audit risk because ________.

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.

Which of the following accounts is not considered in the production cycle?

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

Filters

Exam 13: Payroll and Production Processes

In the area of payroll, which of the following procedures represents proper control over the custody of assets?

Small Corporation uses a Wages Clearing Account for its payroll disbursements. At the end of February, a reasonably large debit balance remained in this account. What is the most likely reason?

Selecting a sample of job orders from the job cost summary and matching them to bills of material and the schedule of production labour requirements is a procedure designed to test the control objective of ________.

Most of the transactions in the production cycle are cost accounting allocations, unit cost determinations, and standard cost calculations.

The sampling unit in a test of controls relating to the validity of payroll transactions is ordinarily a(n) ________.

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?

If auditors compare the gross profit margin by product and compare it with prior periods, this is an example of a(n)

Which of the following is NOT a major risk in the payroll cycle?

Describe the major risk areas associated with the payroll cycle.

In the audit of payroll, auditors often examine the endorsements on a sample of cancelled payroll cheques. What is the purpose of this procedure?

A payroll "clearing account" is a temporary account that holds payroll transactions until final accounting entries are prepared.

What is a clearing account? What are the risks associated with this type of account?

Finished goods inventory is low in inherent risk since production is so well understood.

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

A test of the completeness objective is selecting a sample of payroll register entries and vouching them to employee data in the personnel files such as employee identification, rate of pay, and authorized deductions.

Which of the following would raise a red flag in the audit of payroll?

Production accounting generates important information for management decisions but also is a source of audit risk because ________.

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.

Which of the following accounts is not considered in the production cycle?

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

Filters