Question 1

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 2

Selecting a sample of time clock cards and examining them for evidence of approval by a supervisor then tracing the hours recorded to the payroll registers is a procedure designed to obtain evidence about the control objective(s)of ________.

Accepted Answer

A) validity only 
B) authorization only 
C) completeness only 
D) authorization and completeness. 
A) validity only 
B) authorization only 
C) completeness only 
D) authorization and completeness.

Question 3

Which of the following documents is NOT included in the payroll cycle?

Accepted Answer

A) payroll cheques 
B) timekeeping records 
C) termination notices 
D) supplier invoices 
A) payroll cheques 
B) timekeeping records 
C) termination notices 
D) supplier invoices

Question 4

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 5

Overall production authorization starts with production planning,which usually is based on a sales forecast.

Accepted Answer

A) True 
 B)False

Question 6

Cost accounting can be performed by those who also ________.

Accepted Answer

A) authorize production 
B) allocate overhead charges 
C) have custody of assets 
D) reconcile labour reports 
A) authorize production 
B) allocate overhead charges 
C) have custody of assets 
D) reconcile labour reports

Question 7

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 8

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 9

A materials requisition is the document that authorizes the inventory custodian to release raw materials and supplies to production personnel.

Accepted Answer

A) True 
 B)False

Question 10

Federal Form T4 Summary is the employer's annual federal employee remittance return.

Accepted Answer

A) True 
 B)False

Question 11

Tracing selected items from the payroll register to approved,employee time cards provides evidence that ________.

Accepted Answer

A) internal controls relating to payroll disbursements were operating effectively 
B) payroll cheques were signed by an appropriate officer independent of the payroll preparation process 
C) only bona fide employees worked and their pay was properly computed 
D) employees worked the number of hours for which their pay was computed 
A) internal controls relating to payroll disbursements were operating effectively 
B) payroll cheques were signed by an appropriate officer independent of the payroll preparation process 
C) only bona fide employees worked and their pay was properly computed 
D) employees worked the number of hours for which their pay was computed

Question 12

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 13

Only supervisors have physical custody of materials,equipment,and labour while the production work is performed.

Accepted Answer

A) True 
 B)False

Question 14

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 15

One procedure in an audit program for tests of controls reads: "Select a sample of employees from the payroll register and vouch identification numbers,pay rates,and authorized deductions to the personnel files." This procedure is designed to test the validity of payroll information for employees.

Accepted Answer

A) True 
 B)False

Question 16

The accounting department at Blue Manufacturing Limited receives production information at the end of each week.The production floor supervisor reports time and production data and the payroll department reports labour cost data.How will the accounting department use this information? Why?

Accepted Answer

The accounting department is receiving d

Question 17

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 18

A test of the validity objective is to examine a sample of production cost reports and recalculate all costs entered.

Accepted Answer

A) True 
 B)False

Question 19

Describe the major risk areas associated with the payroll cycle.

Accepted Answer

a.Paying fictitious employees (invalid t

Question 20

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: Author

Exam 13: Payroll and Production Processes

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

Selecting a sample of time clock cards and examining them for evidence of approval by a supervisor then tracing the hours recorded to the payroll registers is a procedure designed to obtain evidence about the control objective(s)of ________.

Which of the following documents is NOT included in the payroll cycle?

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

Overall production authorization starts with production planning,which usually is based on a sales forecast.

Cost accounting can be performed by those who also ________.

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.

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

A materials requisition is the document that authorizes the inventory custodian to release raw materials and supplies to production personnel.

Federal Form T4 Summary is the employer's annual federal employee remittance return.

Tracing selected items from the payroll register to approved,employee time cards provides evidence that ________.

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

Only supervisors have physical custody of materials,equipment,and labour while the production work is performed.

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

One procedure in an audit program for tests of controls reads: "Select a sample of employees from the payroll register and vouch identification numbers,pay rates,and authorized deductions to the personnel files." This procedure is designed to test the validity of payroll information for employees.

The accounting department at Blue Manufacturing Limited receives production information at the end of each week.The production floor supervisor reports time and production data and the payroll department reports labour cost data.How will the accounting department use this information? Why?

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

A test of the validity objective is to examine a sample of production cost reports and recalculate all costs entered.

Describe the major risk areas associated with the payroll cycle.

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.

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

hapter 15 Completing the Audit Work

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

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

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