TOPIC: HUMAN RESOURCE AND PAYROLL

1. In auditing payroll, an auditor most likely would

A. Observe entity employees during a payroll distribution
B. Compare payroll costs with the entity standards and budgets
C. Trace individual employee deductions to entity journal entries
D. Verify that checks representing unclaimed wages are mailed
2. An auditor is most likely to perform substantive tests of details on payroll transactions and
balances when
A. Analytical procedures indicate unusual fluctuations in recurring payroll entries.
B. Cutoff tests indicate a substantial amount of accrued payroll expense.
C. The assessed level of control risk relative to payroll transaction is low.
D. Accrued payroll expense consists primarily of unpaid commissions.
3. Which of the following audit procedures would provide the least relevant evidence in determining
that payroll payments were made to bona fide employees?
A. Reconcile time cards in use to employees on the job.
B. Test the payroll account bank reconciliation by trading outstanding checks to the payroll
register.
C. Examine cancelled checks for proper endorsement and compare with personnel records.
D. Test for segregation of the authorization for payment from the hire/fire authorization.
4. One payroll audit objective is to determine whether the employees received pay in amounts
recorded in the payroll journal. To achieve this objective, the auditor should
A. Determine whether a proper segregation of duties exists between recording payroll and
reconciling the payroll bank account.
B. Requesting that a company official distribute all paychecks.
C. Reconcile the payroll bank account.
D. Compare cancelled payroll checks with the payroll journal.
5. Substantive procedures for payroll transactions and balances primarily focus on analytical
procedures to identify unexpected fluctuations in recurring payroll entries. Which of the
following is an appropriate analytical procedure for payroll?
A. Reconcile the payroll bank account
B. Compare the relationship of hours worked and payroll with that of the preceding year.
C. Inspect authorization on time cards.
D. Compare authorized wage rates with payroll records.
6. To check the accuracy of hours worked, an auditor would ordinarily compare clock cards with
A. Shop job time tickets
B. Personnel records
C. Time recorded in the payroll register
D. Labor variance reports
7. An auditor found that employee time cards in one department are not properly approved by the
supervisor. Which of the following could occur?
A. Payroll checks might not be distributed to the appropriate payees.
B. The wrong hourly rate could be used to calculate gross pay.
C. Employees might be paid for hours they did not work.
D. Duplicate paychecks might be issued.
8. Which of the following items must exist in every employee's payroll file?
A. Spouse's social security number
B. Employment history
C. Spouse's birth date
D. Occupation
9. Why must pay period information be a part of an employee's payroll file?
A. As a means of tracking time worked for overtime compensation purposes.
B. To ensure that the employee receives all compensation earned.
C. As a means of ensuring pay equality among employees.
D. To document satisfaction of court-ordered obligations.
10. Which pay frequency has 24 pay periods annually?
A. Weekly
B. Biweekly
C. Semimonthly
D. Semi-weekly
11. Which pay frequency has 26 pay periods per year?
A. Bimonthly
B. Biweekly
C. Semimonthly
D. Semi-weekly
12. Which pay frequency has 12 pay periods?
A. Daily
B. Weekly
 C. Monthly
D. Semimonthly
13. If a firm pays its employees biweekly, how often does it disburse employee compensation?
A. Twice per week
B. Every week
C. Every two weeks
D. Every three weeks
14. The payroll and personnel cycle ends with which of the following events?

A. Interviewing job candidates.

B. Hiring a new employee.
C. Existing employees submitting requests for payment for work performed.
D. Issuance of paychecks.
15. For internal control purposes, which of the following individuals should preferably be responsible
for the distribution of payroll checks?
A. Bookkeeper.
B. Payroll clerk
C. Cashier.
D. Receptionist.
16. The total of the individual employee earnings in the payroll master file equals the total:
A. balance of gross payroll in general ledger accounts.
B. of the checks drawn to employees for payroll.
C. gross payroll plus the total contributed by the employer for payroll taxes.
D. gross pay for the current week’s payroll.
17. For appropriate segregation of duties, journalizing and posting summary payroll transactions
should be assigned to
A. The treasurer's department.
B. General accounting.
C. Payroll accounting.
D. The timekeeping department.
18. The most important means of verifying account balances in the payroll and personnel cycle are:
A. tests of controls and tests of transactions.
B. analytical procedures and tests of controls.
C. analytical procedures and tests of transactions.
D. test of controls and tests of details of balances.
19. A common audit procedure in the audit of payroll transactions involves tracing selected items
from the payroll journal to employee time cards that have been approved by supervisory
personnel. This procedure is designed to provide evidence in support of the audit proposition that
A. Only bona fide employees worked, and their pay was properly computed.
B. Jobs on which employees worked were charged with the appropriate labor cost.
C. Internal controls relating to payroll disbursements are operating effectively.
D. All employees worked the number of hours for which their pay was computed.
20. Which of the following circumstances would not cause an auditor to extend payroll procedures
considerably?
A. Payroll significantly affects inventory valuation.
B. There is a possibility of material fraudulent payroll transactions.
C. There is a weak internal control structure.
D. There is a lack of independent third-party evidence, such as confirmations.
21. Personnel department responsibilities should be separated from payroll preparation to
A. Separate the custody of assets from the recording function.
B. Establish clear lines of authority and accountability.
C. Separate the authorization of transactions from the recording function.
D. Separate the authorization of transactions from the execution of transactions.
22. The primary concern in testing payroll-related liabilities is to make sure that:
A. accruals are properly valued.
B. transactions are recorded in the proper period.
C. there are no understated or omitted accruals.
D. the accruals are not overstated.
23. Which of the following is not a common activity within personnel and payroll?
A. Initiate terminations.
B. Prepare and update personnel records.
C. Prepare and record payroll.
D. Distribute paychecks to employees.
24. Which of the following errors gives the auditor the least concern in auditing payroll transactions?
A. An error that indicates possible fraud.
B. Computational errors in formulas when a computerized system is used.
C. Classification errors in charging labor to inventory and job cost accounts.
D. Each of the above gives the auditor significant concern.
25. Of the financial statement accounts listed below, which is not likely affected by the accuracy of
payroll and account distribution?
A. Cost of sales.
B. Accrued taxes.
C. Cash.
D. Finished goods inventory.
26. A surprise payroll payoff in which employees must pick-up and sign for their pay check is one
means of:
A. identifying employees who do not have proper work credentials.
B. establishing a tightly controlled, fraud-free work environment .
C. testing for nonexistent employees.
D. identifying employees who have not submitted proper W-2 forms.
27. One of the auditor's objectives in observing the actual distribution of payroll checks is to
determine that every name on the payroll is that of a bona fide employee. The payroll
observation is an auditing procedure that is generally performed for which of the following
reasons?
A. The professional standards that are generally accepted require the auditor to perform the
payroll observation.
B. The various phases of payroll work are not sufficiently segregated to afford effective
control.
C. The independent auditor uses personal judgment and decides to observe the payroll
distribution on a particular audit.
D. The standards that are generally accepted by the profession are interpreted to mean that
payroll observation is expected on an audit unless circumstances dictate otherwise.
28. Inherent risk is typically _____ for balance-related audit objectives as they relate to payroll.
A. not considered
B. low
C. Moderate
D. High
29. The most important consideration in evaluating the fairness of the amounts accrued for vacation
pay, sick pay, and other benefits is the:
A. consistent accrual of these liabilities relative to those of preceding periods.
B. actual expense incurred for the prior period.
C. amount expended to date in the current period.
D. profitability of the client which will enable these liabilities to be met.
30. Once the auditor has determined the company’s policy for accruing wages and knows it is
consistent with that of previous years, the appropriate audit procedure to test for cutoff and
accuracy is to:
A. recalculate the client’s accruals.
B. compare the ledger balance with the journal and the tax form.
C. confirm the amount with employees.
D. compare the recorded accrued wages with the amount approved in the minutes of the
Board.
31. A potential threat to payroll processing activity is theft or fraudulent distribution of payroll
checks. One control that can be implemented to help prevent pay checks being issued to “ghost”
employees is
A. use of a payroll clearing account
B. pay checks should be physically distributed by someone who does not authorize or record
payroll
C. periodic reconciliation of the payroll bank account
D. The cashier should sign the all the payroll checks
32. Which of the following departments most likely approves changes in pay rates and deductions
from employee salaries?
A. Payroll
B. Personnel
C. Controller
D. Treasurer
33. Traditionally, accountants have been most involved with which portion of the HRM/ payroll
cycle?
A. Hiring
B. Payroll
C. Training
D. performance evaluation
34. Which of the following statements is true?
A. Financial statements report the value of employee knowledge and skills.
B. Turnover and absenteeism are costly.
C. All employees must fill out time cards.
D. Default configurations of ERP packages typically provide good segregation of duties.
35. Which document lists the current amount and year-to-date totals of gross pay, deductions, and net
pay for one employee?
A. payroll register
B. time card
C. paycheck
D. earnings statement
36. To maximize effectiveness of internal controls over payroll, which of the following persons
should be responsible for distributing employee paychecks?
A. departmental secretary
B. payroll clerk
C. controller
D. departmental supervisor
37. Which of the following is an important supporting document to authorize the transfer of funds to
the payroll bank account?
A. earnings statement
B. time card
C. payroll register
D. W-2 form
38. Which of the following is NOT an objective of the HRM/Payroll cycle?
A. Payroll transactions are all valid
B. Payroll transactions are all authorized
C. Cash and data are safeguarded
D. All employee background checks are made.
39. Unauthorized payroll changes can be minimized by the use of which control?
A. Batch totals
B. Segregation of functions
C. Backup procedures
D. Review of IRS regulations
40. Which control procedure(s) do NOT address the threat of payroll errors?
A. Batch totals
B. Cross-footing the payroll register
C. A payroll clearing account
D. Pre-numbering payroll checks
41. No individual with access to time cards, payroll records, or checks should also be permitted
access to:
A. the computer.
B. job time tickets.
C. personnel records.
D. the canceled check file.
42. The payroll and personnel cycle begins with which of the following events?
A. Interviewing job candidates.
B. Hiring a new employee.
C. Existing employees submitting requests for payment for work performed.
D. Issuance of paychecks.
43. To minimize the opportunity for fraud, unclaimed salary checks should be:
A. deposited in a special bank account.
B. kept in the payroll department.
C. left with the employee’s supervisor.
D. held for the employee in the personnel department.
44. Which of the following type of employee typically does not complete time cards?
A. Hourly employees
B. Salaried employees.
C. All employees must complete time cards.
D. Time cards are typically completed by salaried employees, but may also be completed by
hourly employees.
45. The file for recording each payroll transaction for each employee and maintaining total employee
wages paid for the year to date is the:
A. payroll master file.
B. summary payroll report.
C. payroll journal.
D. job time ticket.
46. In auditing payroll, an auditor most likely would
A. Observe entity employees during a payroll distribution
B. Compare payroll costs with entity standards and budgets
C. Trace individual employee deductions to entity journal entries
D. Verify that checks representing unclaimed wages are mailed.
47. The retirement savings deductions, number of exemptions for withholding allowances, union
dues deductions, and other deductions are found on what form?
 A. Time cards
B. Deduction authorization form
C. Rate authorization form
D. Job time ticket
48. A ____________ includes all payroll transactions processed by the accounting system for a given
period of time.
A. payroll journal
B. payroll transaction file
C. time report
D. payroll summary
49. A payroll review process increases in complexity when:
A. The company is has few departments and few employees.
B. The company is not geographically dispersed.
C. The company is centralized and uses one location.
D. The company has multiple departments and many employees.
50. A company should assign ________ employee(s) the responsibility for signing payroll checks
and disbursements.
A. A limited number of
B. Only one
C. Its most responsible
D. None of these
51. Which of the following describes the class of transactions associated with payroll?
A. posting costs of purchasing inventory
B. payment of employee services
C. payment of withholding taxes and benefits
D. writing off damaged inventory dropped by employees
52. In most audits,the amounts of the balance sheet accounts related to payroll are
A. large and require substantial effort to audit.
B. small compared with the transactions.
C. large on the liability side but small on the asset side.
D. significantly larger than the related accounts on the income statement
53. Which is the only one class of transaction relating to the payroll cycle?
A. Receiving of goods
B. Obtaining of cash
C. Receipt of cash
D. Sales
54. Payroll and personnel costs at ABC Manufacturing are a major expense. This means that
improper allocation or misclassification of labour costs could result in
A) a material misstatement of net income.
B) a net effect that is negligible when costing inventory.
C) quality control problems with respect to the production of finished products.
D) incorrect payment of payroll to employees.

55. In auditing the imprest payroll account, which of the following procedures will take the least
amount of auditor time?
A) tests of controls
B) risk analysis and obtaining an understanding of controls
C) analytical procedures
D) tests of details of balances

56. The human resources department would likely provide which of the following internal controls
for the human resources and payroll cycle?
A) recalculation of net pay for every pay
B) independent verification of wage rate
C) account for the continuity of employee numbers
D) account for the continuity of payroll check numbers

57. Which of the following is an example of semi-permanent information that would be included in
personnel records?
A) gross pay for the monthly pay issued in September
B) net pay for the weekly pay issued in the first week of October
C) category of job the person is employed in
D) income tax deducted for the current pay

58. Otto decided to outsource the payroll function to Magna Plus. For the purpose of an assurance
engagement, Magna is considered a
 A) service organization.
B) user entity.
C) payroll administrator.
D) human resource company.

59. Otto decided to outsource the payroll function to Magna Plus. The controller of Otto should still
A) recalculate the payroll and its remittance to ensure accuracy.
B) review and authorize each individual payment to employees.
C) review the payroll journal and compare the total hours worked with the payroll time records.
D) inquire with the manager of Magna Plus if they suspect any unusual transactions.

60. The file for recording each payroll transaction for each employee and maintaining total employee
wages paid for the year to date is the
A) payroll master file.
B) payroll transaction file.
C) payroll journal.
D) job time ticket.

61. The most important control in the payroll cycle is clear, proper documentation of the employees job
responsibilities and wages by the appropriate level of authority. This control is associated with which
audit objective?
A) completeness
B) classification
C) valuation
D) occurrence

62. Which of the following tests of controls would pertain to whether existing payroll transactions are
recorded?
A) Compare cancelled cheques with payroll journal details.
B) Compare cancelled cheques with payroll records.
C) Foot the payroll journal and trace details to the general ledger.
D) Conduct gap testing for a sequence of payroll cheques.

63. Which of the following internal controls helps ensure that recorded payroll payments are for work
actually performed by existing employees?
A) procedures requiring the recording of transactions as soon as possible
B) only valid employees from the computer data files are accepted for processing
C) internal verification of payroll file contents
D) independent preparation of payroll bank reconciliation

64. When auditing the human resources and payroll cycle, the auditor should verify the officers'
compensation because
A) officers are more likely to commit fraud.
B) officers' compensation is likely more prone to error.
C) some officers may have complex compensation packages.
D) some officers may be in a position to pay themselves more than the authorized amounts.

65. Verification of the legitimacy of year-end unpaid bonuses to officers and employees can be
accomplished by comparing the recorded accrual to the amount
A) in the expense account.
B) used in the prior period.
C) authorized and recorded in the minutes of the board of directors.
D) paid in the subsequent period.

66. A form issued for each employee summarizing the earnings record for the calendar year is the
A) rate authorization form.
B) summary payroll report.
C) payroll master file.
D) T4 form.

67. Ricky recently changed jobs from payroll analyst to assistant regional manager of production. An
employee at the production facility came to see Ricky and complained that he was not paid on the
 last payroll cheque for the overtime he had done. Ricky apologized for this mistake and logged into
the payroll system to modify the next paycheck for the employee to ensure that he would be paid for
the additional hours. Which of the following statements correctly applies to this scenario?
A) The company did not properly allocate access rights.
B) The company did not properly complete the access rights approval form.
C) The company did not properly check employee background when they hired Ricky.
D) Ricky did not do anything wrong since the employee had worked the hours.

68. An auditor will ordinarily determine whether payroll checks are properly endorsed during the testing
of
A) Time cards.
B) The voucher system.
C) Cash in bank.
D) Accrued payroll. (AICPA ADAPTED)

69. Which of the following control procedures could best prevent direct labor from being charged to
manufacturing overhead?
A) Comparison of daily journal entries with factory labor summary.
B) Examination of routing tickets from finished goods on delivery.
C) Reconciliation of work-in-process inventory with cost records.
D) Recomputation of direct labor based on inspection of time cards. (AICPA ADAPTED)

70. For appropriate segregation of duties, journalizing and posting summary payroll transactions should
be assigned to
A) The treasurer's department.
B) General accounting.
C) Payroll accounting.
D) The timekeeping department. (AICPA ADAPTED)

71. Hitech, Inc., has changed from a conventional to a computerized payroll clock card system. Factory
employees now record time in and out with magnetic cards, and the computer system automatically
updates all payroll records. Because of this change,
A) The auditor must audit through the computer.
B) Internal control has improved.
C) Part of the audit trail has been lost.
D) The potential for payroll-related fraud has been diminished. (AICPA ADAPTED)

72. In the weekly computer run to prepare payroll checks, a check was printed for an employee who had
been terminated the previous week. Which of the following control procedures, if properly utilized,
would have been most effective in preventing the error or assuring prompt detection?
A) A control total for hours worked, prepared from time cards collected by the timekeeping
department.
B) Requiring the treasurer's office to account for the numbers of the prenumbered checks issued to
the computer department for the processing of the payroll.
C) Use of a check digit for employee numbers.
D) Use of a header label for the payroll input sheet. (AICPA ADAPTED)
73. To minimize the opportunities for fraud, unclaimed cash payroll should be
A) Deposited in a safe deposit box.
B) Held by the payroll custodian.
C) Deposited in a special bank account.
D) Held by the controller. (AICPA ADAPTED)

74. 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
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.
(AICPA ADAPTED)

75. In the audit of the following types of profit-oriented enterprises, which one would the auditor be most
likely to place special emphasis on testing the internal controls over proper classification of payroll
transactions?
A) A manufacturing organization.
B) A retailing organization.
C) A wholesaling organization.
 D) A service organization. (AICPA ADAPTED)

76. A common audit procedure in the audit of payroll transactions involves tracing selected items from
the payroll journal to employee time cards that have been approved by supervisory personnel. This
procedure is designed to provide evidence in support of the audit proposition that
A) Only bona fide employees worked, and their pay was properly computed.
B) Jobs on which employees worked were charged with the appropriate labor cost.
C) Internal controls relating to payroll disbursements are operating effectively.
D) All employees worked the number of hours for which their pay was computed.
(AICPA ADAPTED)

77. Which of the following procedures is most effective in providing reasonable assurance that payroll
checks are distributed only to bona fide employees?
A) An employee independent of payroll preparation compares endorsements on canceled payroll
checks with employee signatures in personnel records.
B) All changes in pay rates and deductions are reviewed and approved by a responsible official
independent of payroll preparation and distribution.
C) All unclaimed paychecks are returned to an employee independent of payroll preparation and
distribution.
D) All personnel and payroll records and documents are prenumbered and physically protected from
unauthorized access.
78. The proper use of prenumbered termination notice forms by the payroll department should provide
assurance that all

A) Uncashed payroll checks were issued to employees who have not been terminated.
B) Personnel files are kept up to date.
C) Employees who have not been terminated receive their payroll checks.
D) Terminated employees are removed from the payroll. (AICPA ADAPTED)

79. Personnel department responsibilities should be separated from payroll preparation to

A) Separate the custody of assets from the recording function.
B) Establish clear lines of authority and accountability.
C) Separate the authorization of transactions from the recording function.
D) Separate the authorization of transactions from the execution of transactions.

80. A factory foreman discharged an hourly worker but did not notify the payroll department. The
foreman then forged the worker's signature on time cards, and, when giving out the checks, diverted
the payroll checks drawn for the discharged worker to his own use. The most effective procedure for
preventing this activity is to
A) Require written authorization for all employees added to or removed from the payroll.
B) Have a "paymaster" who has no other payroll responsibility distribute the payroll checks.
C) Have someone other than persons who prepare or distribute payroll obtain custody of unclaimed
checks.
D) From time to time, rotate persons distributing the payroll. (AICPA ADAPTED)

81. Which of the following is not a common activity within personnel and payroll?
A) Initiate terminations.
B) Prepare and update personnel records.
C) Prepare and record payroll.
D) Distribute paychecks to employees.

82. Which of the following is an effective internal accounting control used to prove that production
department employees are properly validating payroll time cards at a time-recording station?
A) Internal auditors should make observations of distribution of paychecks on a surprise basis.
B) Time cards should be carefully inspected by those persons who distribute pay envelopes to the
employees.
C) One person should be responsible for maintaining records of employee time for which salary
payment is not to be made.
D) Daily reports showing time charged to jobs should be approved by the supervisor and compared
to the total hours worked on the employee time cards.
83. Effective internal accounting control over unclaimed payroll checks that are kept by the company
would include accounting department procedures that require:
A) Effective cancellation and stop payment orders for checks representing unclaimed wages.
B) Preparation of a list of unclaimed wages on a periodic basis.
C) Accounting for all unclaimed wages in a current liability account.
 D) Periodic accounting for the actual checks representing unclaimed wages.

84. Which of the following best describes proper internal control over payroll?
A) The preparation of the payroll must be under the control of the personnel department.
B) The confidentiality of employee payroll data should be carefully protected to prevent fraud.
C) The duties of hiring, payroll computation, and payment to employees should be segregated.
D) The payment of cash to employees should be replaced with payment by checks.

85. Comparing amounts selected from the payroll account analysis for payroll accruals to supporting
documentation would gather evidence primarily for which assertion:

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

86. 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 payroll transactions are recorded in the proper
period would gather evidence primarily for which assertion:
A. Classification.
B. Occurrence.
C. Cutoff.
D. Valuation.

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

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

88. 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
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

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

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

91. Which of the following internal control activities could best prevent direct labor from being charged
to manufacturing overhead?
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 cards
D. Reconciliation of the unfinished job summary and production cost records
92. 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
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

93. 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?
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

94. Key segregations of duties in the human resource management process include all of the following
except
A. The supervision function should be separate from the payroll-processing function
B. The disbursement function should be separate from the supervision function
C. The human resource function should be separate from setting salaries
D. The payroll-processing function should be separate from the general ledger function

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

96. Which of the following is a control activity that most likely could help prevent employee payroll
fraud?
A. The Human Resource department promptly sends employee termination notices to the payroll
supervisor
B. Employees who distribute payroll checks forward unclaimed payroll checks to the absent employees'
supervisors
C. Salary rates resulting from new hires are approved by the payroll supervisor
D. Total hours used for determination of gross pay are calculated by the payroll supervisor

97. An auditor would consider internal control over a client's payroll procedures to be ineffective if the
payroll department supervisor is responsible for
A. Hiring subordinate payroll department employees
B. Having custody over unclaimed paychecks
C. Updating employee earnings records
D. Applying pay rates to time tickets

98. A CPA reviews a client's payroll procedures. The CPA would consider internal control to be less than
effective if a payroll department supervisor was assigned the responsibility for
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
99. Effective internal control over the payroll function would include which of the following?
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

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

References:

 Auditing and Assurance Principles 5e by Richiutte (5th edition).

https://123doc.net/document/4799264-test-bank-auditing-and-assurance-principles-5e-by-
richiutte-ch13.htm
 Auditing Theory 2018-2019 edition by Gerardo S. Roque
 Auditing and Assurance Principles by Arens, Elder & Beasley. Testbanks-Chapter 20.
 https://quizlet.com/247584513/audit-ch-15-flash-cards/
 https://quizplus.com/quiz/14483-quiz-15-audit-of-the-human-resources-and-payroll-
cycle/question/1031350-if-there-is-an-error-in-wage-rates,such-errors-can-typically
 https://cpadiary.wordpress.com/
 https://drive.google.com/drive/folders/1P6HfVIMesALLoXIuCzWzEV1VW-Y-fiyt
 https://quizlet.com/247584513/audit-ch-18-flash-cards/
 https://quizlet.com/247584513/audit-ch-12-flash-cards/

GROUP 3

Leader: BARRIOS, ROSIELYN GRACE

Members:

ABRANILLA, JOANNA MAE

AGLUBO, STEPHANIE DIANE

BELDIA, PITCHIE MAE

BRAGAS, HARNEY FLOR

CARIÑO, GIRLIE

CABIL, MARY JOY

GUIAMALODIN, NOROLNOHA

SAMSONA, MELANIE