ACCT 460 – Chapter 8 Quiz
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An audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible for...
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... Authorizing payroll rate changes for all employees. *The payroll department should be independent of the personnel department, which would be responsible for authorizing all payroll rate changes for the employees of the entity. A supervisor would be authorized, however, to initiate requests for rate increases for supervised employees.*
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* Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?
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- Payroll. - Controller. - Treasurer. - *Personnel.* *The personnel department provides the authorization for payroll-related transactions (e.g., hiring, termination, and changes in pay rates and deductions).*
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* Matthew Corp. has changed from a system of recording time worked on clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computerized system automatically updates all payroll records. Because of this change...
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... Part of the audit trail is altered. *In a manual payroll system, a paper trail of documents would be created to provide audit evidence that controls over each step in processing were in place and functioning. One element of a computer system that differentiates it from a manual system is that a transaction trail useful for auditing purposes might exist only for a brief time or only in computer-readable form.*
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Effective control over the cash payroll function would mandate which of the following?
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- A separate checking account for payroll should be maintained. - *Each employee should be asked to sign a receipt.* - The payroll clerk should fill the envelopes with cash and a computation of the net wages. - Unclaimed payroll envelopes should be retained by the paymaster. *Under a cash payroll system, the receipt signed by the employee is the only document in support of payment. The signed receipt is essential to verify both occurrence and accuracy of payment.*
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A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to...
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... Detect any fictitious employee who may have been placed on the payroll. *A follow-up of unclaimed checks may result in identification of fictitious or terminated employees, thus eliminating an employee's opportunity to claim a paycheck belonging to a terminated employee. The unclaimed checks should then be turned over to a custodian so the internal audit function does not assume operating responsibilities.*
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Auditors ordinarily ascertain whether payroll checks are properly endorsed during the audit of...
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... Clock cards. *Ordinarily, the auditor examines the endorsements on payroll checks while obtaining an understanding of and testing the payroll cycle, which includes consideration of clock cards.*
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In determining the effectiveness of an entity's policies and procedures relating to the occurrence assertion for payroll transactions, auditors most likely would inquire about and...
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... Observe the separation of duties concerning personnel responsibilities and payroll disbursement. *In considering whether transactions actually occurred, the auditor is most concerned about the proper separation of duties between the personnel department (authorization) and the payroll department (processing the transactions).*
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Which of the following activities most likely would be considered a weakness in an entity's internal control over payroll?
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- *The employee who distributes payroll check returns unclaimed payroll checks to the payroll department.* - Payroll checks are prepared by the accounts payable department and signed by the treasurer. - A voucher for the amount of the payroll is prepared in the general accounting department based on the payroll department's payroll summary. - The personnel department sends employees' termination notices to the payroll department.
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Which of the following payroll control activities would most effectively ensure that payment is made only for work performed?
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- *Require employees to have their direct supervisors approve their time cards.* - Have a payroll clerk recalculate all time cards. - Require all employees to record arrival and departure by using the time clock. - Require all employees to sign their time cards.
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Which of the following activities performed by a department supervisor most likely would help to prevent or detect a payroll fraud?
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- *Approving a summary of hours each employee worked during the pay period.* - Setting the pay rate for departmental employees. - Distributing paychecks directly to department employees. - Hiring employees and authorizing them to be added to payroll.
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An audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible for...
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... Authorizing payroll rate changes for all employees.
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* Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?
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- Treasurer. - Payroll. - *Personnel.* - Controller.
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Matthew Corp. has changed from a system of recording time worked on clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computerized system automatically updates all payroll records. Because of this change...
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...Part of the audit trail is altered.
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*Effective control over the cash payroll function would mandate which of the following?
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- The payroll clerk should fill the envelopes with cash and a computation of the net wages. - Unclaimed payroll envelopes should be retained by the paymaster. - *Each employee should be asked to sign a receipt.* - A separate checking account for payroll should be maintained.
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* A large retail enterprise has established a policy that requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to...
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... Detect any fictitious employee who may have been placed on the payroll.
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Auditors ordinarily ascertain whether payroll checks are properly endorsed during the audit of...
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... Clock cards.
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In determining the effectiveness of an entity's policies and procedures relating to the occurrence assertion for payroll transactions, auditors most likely would inquire about and...
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... Observe the separation of duties concerning personnel responsibilities and payroll disbursement.
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Which of the following activities most likely would be considered a weakness in an entity's internal control over payroll?
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- Payroll checks are prepared by the accounts payable department and signed by the treasurer. - The personnel department sends employees' termination notices to the payroll department. - A voucher for the amount of the payroll is prepared in the general accounting department based on the payroll department's payroll summary. - *The employee who distributes payroll check returns unclaimed payroll checks to the payroll department.*
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Which of the following payroll control activities would most effectively ensure that payment is made only for work performed?
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- *Require employees to have their direct supervisors approve their time cards.* - Require all employees to sign their time cards. - Have a payroll clerk recalculate all time cards. - Require all employees to record arrival and departure by using the time clock.
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Which of the following activities performed by a department supervisor most likely would help to prevent or detect a payroll fraud?
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- *Approving a summary of hours each employee worked during the pay period.* - Setting the pay rate for departmental employees. - Hiring employees and authorizing them to be added to payroll. - Distributing paychecks directly to department employees. *A summary of hours worked would not provide any additional opportunities for fraud and may detect a payroll fraud if some employees were working a significant number of hours above other employees in the same areas.*
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For each of the three assertions (1, 2, and 3), select the one best substantive audit procedure (a-g) for obtaining competent evidence. A procedure may be selected only once or not at all.
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*** Get familiar with some of the substantive procedures used to determine assertions.
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* Following are the four assertions about account balances that can be applied to the audit of a company's PP&E, including assets the company has constructed itself: existence, rights and obligations, completeness, and valuation and allocation.
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*** Understand the assertions: existence, rights and obs, completeness, and valuation and alloc.
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* The typical functions of the personnel and payroll cycle would not include...
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... Labor relations.
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* An internal control questionnaire for payroll processing occurrence assertion would not include which of the following questions?
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- Are checks distributed by the employee's immediate supervisor? - Is the payroll compared to personnel files periodically? - Are names of terminated employees reported in writing to the payroll department? - *Are all wage rates determined by contract or approved by a personnel officer?*
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Which of the following functional responsibilities would not relate to salaried employees?
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- *collecting timekeeping data.* - supervision. - payroll distribution. - personnel or labor relations.
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The test of controls for payroll includes the following audit procedures. Next to each of the procedures indicate the related management assertion about transactions.
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*** Assertions understand plz
