Question 1

Which of the following would have the least amount of importance regarding controls over the processing of payroll?

Accepted Answer

A)  The person authorized to sign paychecks should not be otherwise involved in the preparation of the payroll. 
B)  A check-signing machine should not be used to replace a manual signature. 
C)  Distribution of pay checks should be performed by someone who is not involved in the other payroll functions. 
D)  Unclaimed paychecks should be immediately returned for redeposit. 
A)  The person authorized to sign paychecks should not be otherwise involved in the preparation of the payroll. 
B)  A check-signing machine should not be used to replace a manual signature. 
C)  Distribution of pay checks should be performed by someone who is not involved in the other payroll functions. 
D)  Unclaimed paychecks should be immediately returned for redeposit.

Question 2

Audit tests of payroll are usually not extensive because

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 3

What is one audit procedure that may be used to test for proper handling of terminated employees?

Accepted Answer

A procedure that tests for proper handli

Question 4

Auditors should consider the use of data analytics tools to such for payroll-related anomalies including duplicate employee names, missing data in the payroll master files, or duplicate direct deposit bank account numbers.

Accepted Answer

A) True 
 B)False

Question 5

________ is not a transaction-related audit objective for the classes of transactions underlying the payroll cycle.

Accepted Answer

A)  Classification 
B)  Existence 
C)  Timing 
D)  Completeness 
A)  Classification 
B)  Existence 
C)  Timing 
D)  Completeness

Question 6

The deduction authorization form authorizes the rate of pay and the deductions for taxes, dues, etc.

Accepted Answer

A) True 
 B)False

Question 7

Although some time records may be in paper form, most are electronically generated - for example, employees may enter time worked into online systems, apps and other IT-based payroll systems.

Accepted Answer

A) True 
 B)False

Question 8

Auditors may extend their tests of payroll in which of the following circumstances?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

In most accounting systems, payroll expenses are charged when the employees are actually paid rather than when the labor costs are actually incurred.

Accepted Answer

A) True 
 B)False

Question 10

Since the amount of expense report reimbursements is insignificant, auditors can ignore expense reports for officers and directors.

Accepted Answer

A) True 
 B)False

Question 11

Internal control over payroll is normally highly structured and well controlled.

Accepted Answer

A) True 
 B)False

Question 12

Most monetary misstatements of payroll are corrected by internal verification controls or by the PCAOB.

Accepted Answer

A) True 
 B)False

Question 13

When labor is a material factor in inventory valuation, the auditor should place special emphasis on testing the internal controls concerning

Accepted Answer

A)  fictitious employees. 
B)  authorization of wage rates. 
C)  proper classification of payroll transactions. 
D)  completeness of recorded transactions. 
A)  fictitious employees. 
B)  authorization of wage rates. 
C)  proper classification of payroll transactions. 
D)  completeness of recorded transactions.

Question 14

Despite the large dollar amounts involved in the payroll and personnel cycle, auditors typically spend less time auditing this cycle than others.

Accepted Answer

A) True 
 B)False

Question 15

In most accounting systems, the accrued wages and salaries account is used only at the beginning of an accounting period.

Accepted Answer

A) True 
 B)False

Question 16

Paying employees for their services ends the payroll and personnel cycle.

Accepted Answer

A) True 
 B)False

Question 17

An auditor traces a sample of electronic time cards before and after the bi-weekly payroll report and then traces to the payroll master file to determine that payroll transactions are reported in the correct period. The auditor is gathering evidence for which audit objective?

Accepted Answer

A)  completeness 
B)  existence 
C)  cut-off 
D)  accuracy 
A)  completeness 
B)  existence 
C)  cut-off 
D)  accuracy

Question 18

It is generally more difficult for the auditor to detect payment of fraudulent hours than payment of fictitious employees.

Accepted Answer

A) True 
 B)False

Question 19

Required disclosures for payroll and personnel cycle transactions and balances are extensive.

Accepted Answer

A) True 
 B)False

Question 20

An imprest payroll account that has a significant balance may indicate the presence of

Accepted Answer

A)  employees not cashing their payroll checks. 
B)  fraudulent transfer of funds by the company. 
C)  lack of controls over payroll distribution. 
D)  the company overpaying its employees. 
A)  employees not cashing their payroll checks. 
B)  fraudulent transfer of funds by the company. 
C)  lack of controls over payroll distribution. 
D)  the company overpaying its employees.

Exam 20: Audit of the Payroll and Personnel Cycle

Which of the following would have the least amount of importance regarding controls over the processing of payroll?

Audit tests of payroll are usually not extensive because

What is one audit procedure that may be used to test for proper handling of terminated employees?

Auditors should consider the use of data analytics tools to such for payroll-related anomalies including duplicate employee names, missing data in the payroll master files, or duplicate direct deposit bank account numbers.

________ is not a transaction-related audit objective for the classes of transactions underlying the payroll cycle.

The deduction authorization form authorizes the rate of pay and the deductions for taxes, dues, etc.

Although some time records may be in paper form, most are electronically generated - for example, employees may enter time worked into online systems, apps and other IT-based payroll systems.

Auditors may extend their tests of payroll in which of the following circumstances?

In most accounting systems, payroll expenses are charged when the employees are actually paid rather than when the labor costs are actually incurred.

Since the amount of expense report reimbursements is insignificant, auditors can ignore expense reports for officers and directors.

Internal control over payroll is normally highly structured and well controlled.

Most monetary misstatements of payroll are corrected by internal verification controls or by the PCAOB.

When labor is a material factor in inventory valuation, the auditor should place special emphasis on testing the internal controls concerning

Despite the large dollar amounts involved in the payroll and personnel cycle, auditors typically spend less time auditing this cycle than others.

In most accounting systems, the accrued wages and salaries account is used only at the beginning of an accounting period.

Paying employees for their services ends the payroll and personnel cycle.

An auditor traces a sample of electronic time cards before and after the bi-weekly payroll report and then traces to the payroll master file to determine that payroll transactions are reported in the correct period. The auditor is gathering evidence for which audit objective?

It is generally more difficult for the auditor to detect payment of fraudulent hours than payment of fictitious employees.

Required disclosures for payroll and personnel cycle transactions and balances are extensive.

An imprest payroll account that has a significant balance may indicate the presence of

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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