Exam 20: Audit of the Payroll and Personnel Cycle

Mathews and Company has $112,000 in an accrued payroll account. The company's weekly payroll is $186,700 and the accrual represents 3 days out o 5 working days. If the auditor has determined that controls are effective over payroll, what additional work should the auditor perform for this account?

Firing personnel terminates the payroll and personnel cycle.

There are several key internal controls over the payment of payroll function that should be present. For example, the payroll should be distributed by someone who is not involved in the other payroll functions. Discuss other key internal controls over the payment of payroll function.

Which of the following departments is most likely responsible for pay rate changes and changes in deductible amounts for employees?

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

There are several internal controls in the personnel and employment function that are important from an audit perspective. For example, there should be an adequate investigation of the competence and trustworthiness of new employees. Discuss other internal controls in the personnel and employment function that are important from an audit perspective.

Which of the following is a substantive test of transactions?

In auditing payroll, which of the following procedures will normally require the least amount of auditor time under normal circumstances?

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 is gathering evidence for which audit objective?

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

One common substantive test of payroll transactions for the existence objective is to compare canceled payroll checks with personnel records.

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

It would be appropriate for the payroll department to be responsible for which of the following functions?

Tests of controls and tests of details of balances are the auditor's most important means of verifying account balances in the payroll and personnel cycle.

When a client uses an outside payroll service for processing payroll, professional auditing standards permit the auditor to rely on the internal controls of the service organization if the service organization's auditor has issued a favorable report on the internal controls of the service organization.

The use of an imprest payroll account prevents losses from payment of unauthorized payroll to no more than the balance in the imprest account.

Which of the following statements is false?

What events initiate and terminate the payroll and personnel cycle?

Which of the following is an effective internal accounting control used to prove that production department employees are properly validating payroll time cards at a time-recording station?

Which of the following errors gives the auditor the least concern in auditing payroll transactions?