Exam 20: Audit of the Payroll and Personnel Cycle

If an audit client is a public company, the understanding of internal control must be sufficient to identify opportunities to increase audit effectiveness.

To minimize the opportunity for fraud, unclaimed salary checks should be:

Hiring personnel initiates the payroll and personnel cycle.

When labor is a material part of inventory, auditors should emphasize substantive tests of transactions.

No individual with access to time cards, payroll records, or checks should also be permitted access to:

What types of audit procedures are typically emphasized during the audit of the payroll cycle?

For which of the following functions is the use of prenumbered documents least important?

Which of the following statements is correct?

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

Many companies use outside payroll services to process payroll. Which of the following regarding the auditors responsibilities is most correct regarding their reliance on the internal controls of these outside payroll services?

Which of the following best describes effective internal control over payroll?

Match seven of the terms for documents and records (a-k) used in the payroll and personnel cycle with the descriptions provided below (1-7): a. Human resource records b. Deduction authorization form c. Rate authorization form d. Time card e. Job time ticket f. Summary payroll report g. Payroll check h. W-2 form i. Payroll tax returns j. Payroll journal k. Payroll master file ________ 1. A file used for recording payroll transactions for each employee and maintaining total employee wages paid for the year to date. ________ 2. A document indicating the time the hourly employee started and stopped working. ________ 3. A document written in exchange for services received from an employee. ________ 4. Forms submitted to local, state, and federal units of government for the payment of withheld taxes and the employer's tax. ________ 5. A form authorizing payroll deductions, including the number of exemptions for withholding of income taxes, U.S. savings bonds, and union dues. ________ 6. A form used to authorize the amount of pay. ________ 7. Records including date of employment, personnel investigations, rates of pay, etc.

The periodic payment from the general cash account to the payroll account for net payroll should be tested for at least one payroll period. The primary audit procedure is a(n):

The usual audit test for a public company's officer compensation is to obtain the authorized salary of each officer from the minutes of the board of directors and compare it with:

While most cycles include at least two classes of transactions, the payroll and personnel cycle includes only one class of transactions.

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

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

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

Imprest accounts usually carry a significant balance.

The primary purpose of a surprise payroll payoff is to detect employees who have reported more time than was actually worked (fraudulent hours).