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Exam 15: Audit of the Human Resources and Payroll Cycle

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Question 31

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Access rights management is important because it is the organization's method of

A) establishing data tables usage.
B) identifying master file data.
C) identifying transaction file data.
D) enforcing segregation of duties.

E) All of the above
F) B) and C)

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Question 32

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The internal auditor is running a computer-assisted audit test that compares names and wage rates in the personnel files (stored on optical disk) with the wage rates in the payroll master file and the whole year's payroll transaction files.What is the purpose of these tests?

A) to determine whether any employees were not paid in the most recent pay
B) to check for wage rates that are under the amount specified by the union contract
C) to help with the reconciliation of wage rates to the T4 summary
D) to determine whether terminated employees are still being paid

E) A) and D)
F) B) and C)

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Question 33

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The careful and timely preparation of all payroll withholdings and employer's portion of withholdings is necessary to avoid heavy fines.The most important control in the timely preparation of these returns is

When manufacturing labour affects inventory valuation,a knowledgeable manager should approve wage rate allocations to make sure that labour is distributed to the proper accounts.Which of the following controls helps to prevent error in the resulting job costing?

Even though the tests of controls are the most important part of testing payroll,many auditors spend little time in this area.In many audits,there is a minimal risk of material misstatements,even though payroll is frequently a significant part of total expenses.Explain the reasons the auditors have for justifying this position.

The WhirlyGig Factory Ltd.manufactures whirly gigs of many different sizes and types.The company employs 55 employees,all paid on an hourly basis.Employees fill in time sheets and hand them in every Monday to the payroll clerk,Pamela.For factory employees,the time sheet shows the hours worked by product job number,and indicates if the job has been completed.The payroll clerk tracks the hours worked by job.When a job is complete,she compares the totals to the estimate made by the owner,Faruq.A bonus is paid for actual hours paid less than the estimated amount. Every Wednesday,Pamela prepares the cheques and gives them to Faruq for signing.Pamela then staples the cheques to the payroll stubs.Pamela hands out the office cheques and gives the other cheques to the factory supervisor for distribution. Required:A)Identify control weaknesses and their impact,and provide recommendations for improvement.B)What is the impact of the control weaknesses upon your audit approach?

In most audits,the amounts of the balance sheet accounts related to payroll are

Which of the following controls best prevents employees from checking in for more than one employee?

Otto decided to outsource the payroll function to Magna Plus.For the purpose of an assurance engagement,Magna is considered a

To test whether the client has fulfilled its legal obligation in submitting payments for all payroll withholdings,the auditor must first

Which of the following internal control tests would assist in satisfying the occurrence transaction-related audit objective for payroll?

Verification of the legitimacy of year-end unpaid bonuses to officers and employees can be accomplished by comparing the recorded accrual to the amount

You have been working on the audit of Ballistic Defence Company for several years now.There are about 15 000 employees working at the company in various positions. Recently,the company contracted for a new customized payroll system,which is to be implemented next month.You have been asked to assess the acceptance testing plan that is being prepared by accounting staff.In particular,they want you to help assess controls that will improve the accuracy of information entered into the new computer system. The company uses mainframe computing systems.Assume that the typical payroll information is available on computer files (i.e. ,employee number,employee name,social insurance number,department code,payment type code (salaried or hourly),time worked,wage rate,gross pay,deductions (by type),net pay,and cheque number). Required: Identify the tests that should be conducted by the company's accounting staff with respect to accuracy before accepting the software.

Which of the following describes the class of transactions associated with payroll?

Joan has been the payroll supervisor at York Distribution Company (YDC)for ten years.She has never missed a payroll and Farah,the owner of the company,is delighted with her conscientiousness and knowledge.This is particularly important,as Farah spends a lot of time on the road drumming up new business,and needs competent personnel back at the office. There are two accounting personnel at the office,a receptionist,five shipping and receiving personnel,and thirty sales people employed by YDC.Office and shipping/receiving personnel are paid a salary,while the sales people are paid a monthly base salary plus a percentage of their sales,calculated quarterly.The base salary is low,at $20 000,with a 2% commission,calculated based on sales less any bad debts written off related to their customers. Joan prints off the sales by customer every month and uses this information to calculate commissions.She then prepares the payroll cheques and gives them to Farah,who signs them and gives them to the sales staff at the monthly sales meeting.The cheques are written against a payroll imprest bank account,kept at a balance of $1000.This account is not reconciled,as the staff are very overworked with the increasing volume of business handled by the company. Required:A)Identify control weaknesses and their impact,and provide recommendations for improvement.B)What is the impact of the control weaknesses upon your audit approach?

Which of the following controls could help to prevent unauthorized overtime?

The most important control in the payroll cycle is clear,proper documentation of the employees job responsibilities and wages by the appropriate level of authority.This control is associated with which audit objective?

Which of the following is most likely to approve changes in pay rates and deductions from employee salaries?

Which of the following internal controls would help ensure that existing payroll transactions are recorded?

General controls must be evaluated and their impact considered upon the human resources and payroll transaction cycle because