Exam 20: Audit of the Payroll and Personnel Cycle

Verifying that an adequate chart of accounts is used is a key internal control for the transaction-related objective of

Examining payroll records for an indication of authorization is part of the timing transaction-related audit objective.

Which of the following best describes the systems of internal control for payroll for large companies?

It is usually very easy for an auditor to determine if an employee has overstated their hours worked.

When testing for fraudulent hours or fraudulent expense reports

The audit procedure "recompute hours worked from time cards" is normally performed when testing the completeness objective for payroll.

A weak internal control system allows a department supervisor to "clock in" for a fictitious employee and then approve the employee's time card at the end of the pay period. This fraud would be detected if other controls were in place, such as having an independent party

Firing personnel terminates the payroll and personnel cycle.

Discuss each of the following primary documents and records used in the personnel and employment function in the payroll and personnel cycle: human resource records, deduction authorization form, and the rate authorization form.

Describe at least five auditing procedures which an auditor can perform which could test for the possibility of nonexistent employees being paid by an audit client.

An imprest payroll account limits the client's exposure to payroll fraud.

When the auditor compares the cancelled check or direct deposit with the payroll journal for amount, they are concerned with the transaction-related audit objective of

Payroll tax expense is tested by the auditor in connection with tests of the payroll tax accruals; payroll tax expense can also be tested using audit software.

The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges. The most important control in the timely preparation of these returns is

Most companies, with the exception of small ones, have effective controls over the payroll cycle.

The overall audit objective in the audit of the payroll and the personnel cycle is to evaluate whether the account balances affected by the cycle are fairly stated according to the applicable accounting standards.

The ________ has the responsibility for approving the number of hours worked for each employee.

Which of the following statements is correct?

In testing for the transaction-related audit objective of occurrence, an auditor is verifying that the recorded payroll payments are for work actually performed by existing employees. List three key internal controls that a company should have in place in this area.

For good internal control, the payroll function should be independent of the human resources department.