1.

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? Occurrence.
2. The human resources department would likely provide which of the following internal
controls for the human resources and payroll cycle? Independent verification of wage
rate.
3. If there is an error in wage rates, such errors can typically escalate into material amounts.
What characteristic of the human resources and payroll cycle causes this? Many repeated
transactions.
4. The careful and timely preparation of all payroll withholdings and employer's portion of
withholdings is necessary to avoid heavy fines. The most important control in the timely
preparation of these returns is a well-defined set of policies that indicate when each form
must be filed.
5. In auditing the imprest payroll account, which of the following procedures will take the
least amount of auditor time? tests of details of balances.
6. Otto decided to outsource the payroll function to Magna Plus. The controller of Otto
should still review the payroll journal and compare the total hours worked with the
payroll time records.
7. Which of the following controls helps to prevent error with set up of access rights, and
also helps to prevent unauthorized changes to the access rights? independent comparison
to check that they have been set up properly.
8. Recomputing hours worked from time records provides evidence that employees worked
the number of hours for which their pay was computed.
9. Which of the following is most likely to approve changes in pay rates and deductions
from employee salaries? Personnel department.
10. General controls must be evaluated and their impact considered upon the human
resources and payroll transaction cycle because automated techniques are normally used
to prepare and post payroll transactions.
11. Which of the following internal control tests would be used in assessing that recorded
payroll transactions are for the amount of time actually worked and at the proper pay rate,
and that withholdings are properly calculated? Recompute gross pay.
12. Which of the following is an example of semi-permanent information that would be
included in personnel records? category of job the person is employed in.
13. A weak internal control system allows a foreman to clock in daily for a fictitious
employee and to approve the time card at the end of the payroll period. This fraud would
be detected if other controls were in place, such as having an independent party distribute
paycheques.
14. The file for recording each payroll transaction for each employee and maintaining total
employee wages paid for the year to date is the payroll master file.
15. To minimize the opportunity for fraud, unclaimed salary cheques should be immediately
returned for redeposit.
16. Which of the following best describes proper internal control over payroll? Duties
of hiring, payroll computation, and payment to employees should be segregated.
17. The internal auditor is running a computer-assisted audit test that compares names and
wage rates in the personnel files (stored on optical disk) with the wage rates in the payroll
master file and the whole year's payroll transaction files. What is the purpose of
these tests? to determine whether terminated employees are still being paid.
18. When examining payroll transactions, an auditor is primarily concerned with the
possibility of overpayments and unauthorized payments.
19. When labour is a material factor in inventory valuation, the auditor should place special
emphasis on testing the internal controls concerning proper classification of transactions.
20. 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
paycheque for the employee to ensure that he would be paid for the additional hours.
Which of the following statements correctly applies to this scenario? The company did
not properly allocate access rights.
21. Which of the following is a substantive test of transactions? Reconcile the disbursements
in the payroll journal with the disbursements on the payroll bank statement.
22. Which of the following internal control tests would help to assess whether payroll
transactions were recorded on the correct dates? Compare date on cheque with date the
cheque cleared the bank.
23. 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 material
misstatement of net income.
24. 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?
authorizing the addition or removal of employees from the payroll.
25. Which of the following internal control tests would help to assess whether payroll
transactions were properly classified? Review time records and job records, tracing to
labour distribution.
26. Which of the following controls could help to prevent unauthorized overtime? review by
payroll supervisor of a report that lists all employees working more than the required
hours per week.
27. A wage rate form that also documents a change in job responsibility for one of the
warehouse employees should be approved by the warehouse supervisor and human
resources.
28. Which of the following is not a major risk in the payroll cycle? paying employees more
than the market rate.
29. Which of the following tests of controls would pertain to whether existing payroll
transactions are recorded? Conduct gap testing for a sequence of payroll cheques.
30. Which of the following type of test is most important for the audit of payroll? Internal
control.
31. To test whether the client has fulfilled its legal obligation in submitting payments for all
payroll withholdings, the auditor must first determine the client's requirements for
submitting the payments.
32. The human resources and payroll cycle is the transaction cycle that begins with
the hiring of personnel.
33. The risk of material misstatements of balance sheet account balances related to the
human resources and payroll cycle tend to be low risk.
34. Which of the following describes the class of transactions associated with payroll?
payment of employee services
35. Verification of the legitimacy of year-end unpaid bonuses to officers and employees can
be accomplished by comparing the recorded accrual to the amount authorized and
recorded in the minutes of the board of directors.
36. In most audits, the amounts of the balance sheet accounts related to payroll are
small compared with the transactions.
37. "Recorded payroll transactions are for the amount of time actually worked and at the
proper pay rate; withholdings are properly calculated" relates to which control objective?
Accuracy.