Multiple Choice Questions and Answers

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a. a limit or reasonableness test

b. error review

c. a data validity test

d. a logic sequence test

20. Obtaining an understanding of internal control over personnel and payroll does not include:

a. Performing a preliminary review

b. Documenting the System.

c. Performing a transaction walkthrough.

d. A payroll payoff.

21. Which of the following documents are included in the audit trail for payroll?

a. Time cards, job tickets and disbursement vouchers

b. journal information, which comes from the labor distribution summary and the payroll register.

c. subsidiary ledger accounts, which contain the employee records and various expense accounts.

d. all of the above

22. Which duties should be segregated?

A. Matching purchase requisitions, receiving reports and invoices and authorizing payment

B. Authorizing payment and maintaining the check registry

C. Writing checks and maintaining the check registry

D. Authorizing payment and maintaining the accounts payable subsidiary ledger

23. The use of a/n _________ to distribute checks (rather than the normal supervisor) helps verify the existence of the employees. The supervisor may be party to a payroll fraud by pretending to distribute paychecks to nonexistent employees.

a. Verification of time

b. Independent paymaster

c. Accounts payable

d. General Ledger

24. The HRM system differs from the simple automated system in the following ways except:

a. The various departments transmit transactions to data processing via terminals.

b. Direct access files are used for data storage.

c. Many processes are now performed in real time.

d. None of the above.

25. Which internal control is not an important part of the payroll system?

a. supervisors verify the accuracy of employee time cards.

b. paychecks are distributed by an independent paymaster

c. the accounts payable department verifies the accuracy of the payroll register before transferring payroll funds to the general checking account.

d. the general ledger department reconciles the labor distribution summary and the payroll disbursement voucher.

SUGGESTED ANSWERS AND EXPLANATIONS:

1. B

Job tickets and time cards are the two types of records prepared by production employees.

2. B

If a particular paycheck goes unclaimed by a valid employee, the paymaster-an individual who is independent of the payroll cycle- should return it to payroll. The reason the check went unclaimed can then be investigated.

3. C

The production department prepares time cards and job time tickets. These tasks should be segregated from preparation of personnel action forms (personnel records) performed by the personnel department to eliminate fraud.

4. B

Transaction is less significant than related balance sheet accounts.

5. C

The personnel department prepares and submits personnel action forms to prepare the payroll function.

6. B

Job time tickets capture the total amount of time that individual workers spend on each production job. Clock cards/Time cards should correspond to job time tickets.

7. C

The HRM system captures and processes a wide range of personnel-related data, including employee benefits, labor resource planning, employee relations, employee skills, personnel actions (pay rates, deductions, and so on), as well as payroll.

8. C

Comparison of these two types of time records checks the accuracy of hours worked by employees. This reconciliation helps to eliminate or detect fraud in payroll system.

9. C

An auditor testing EDP controls in a payroll system would most likely use test data containing time tickets with invalid job numbers. The computer should be programmed to compare job numbers on the time tickets with the list of valid, authorized job numbers.

10. C

Payroll rate changes, time and attendance data, and withholdings and deduction requests from employees are considered as input to the payroll system which makes checks to insurance and benefit providers an exception to inputs

11. B

What time clock cards are used, they constitute a form of physical evidence that can be expense.

12. D

Control totals may be used to detect errors in input or processing when information is batched before entry. One type of control total is a hash total which is a total of field amounts for all the records in a batch that are computed for control purpose only.

13. B

Proper approval of overtime would most likely be made by inspection of the related documents and reports to assess whether the authorization policy was applied. The computerized system would be unable to make to make such a judgment.

14. C

Test

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