Question 1

The proper use of prenumbered termination notice forms by the Payroll Department should provide assurance that all
A) Uncashed payroll checks were issued to employees who have not been terminated.
B) Personnel files are kept up to date.
C) Employees who have not been terminated receive their payroll checks.
D) Terminated employees are removed from the payroll.

Accepted Answer

Prenumbered termination notice forms are used to ensure that terminated employees are removed from the payroll. This helps to prevent overpayment and ensure the accuracy of payroll records. Option A, B, and C are not relevant to the use of termination notice forms.

Question 2

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

Accepted Answer

There are various inherent risk factors that can affect human resource management processes, such as talent acquisition, employee development and retention, compliance with labor laws, diversity and inclusion, and data privacy and security. These risks can impact the organization's performance and reputation, as well as the well-being and satisfaction of its employees. Therefore, a robust risk management strategy is necessary to mitigate these risks and ensure effective HR management.

Question 3

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

Accepted Answer

A W-4 form is used to determine how much federal income tax should be withheld from an employee's paycheck, not insurance deductions. A separate form, such as a benefits enrollment form, may be used to authorize insurance deductions.

Question 4

Which of the following could test the assertion of classification for payroll-related liabilities?
A) Compare items in accrued payroll taxes to the supporting payroll tax return.
B) Search for unrecorded liabilities.
C) Examine payroll tax returns to determine that the expense was recorded in the proper period.
D) Review payroll liabilities for proper reporting as short- or long-term.

Accepted Answer

The answer of Which of the following could test the...

Question 5

The human resource function is responsible for managing the personnel needs of the organization.

Accepted Answer

The human resource function is indeed responsible for managing the personnel needs of the organization, such as recruitment, hiring, training, and performance management.

Question 6

The payroll-processing function is responsible for paying employees for services and benefits.

Accepted Answer

The answer of The payroll-processing function is responsible for paying...

Question 7

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?
A) There are significant unexplained variances between standard and actual labor cost.
B) Payroll checks are disbursed by the same employee each payday.
C) Employee time cards are approved by individual departmental supervisors.
D) A separate payroll bank account is maintained on an imprest basis.

Accepted Answer

Significant unexplained variances between standard and actual labor cost could be an indication of ghost employees or employees being paid for hours not worked.

Question 8

Payroll-related expenses normally are not a material cost to the organization.

Accepted Answer

Payroll-related expenses can be a significant cost to an organization as they include salaries, wages, bonuses, benefits, taxes, and other related costs. These expenses can make up a substantial portion of an organization's budget and impact profitability.

Question 9

When examining payroll transactions,an auditor is primarily concerned with the possibility of
A) Underpayments and properly authorized payments.
B) Posting of gross payroll amounts to incorrect salary expense accounts.
C) Misfootings of employee time records.
D) Excess withholding of amounts required to be withheld.

Accepted Answer

The answer of When examining payroll transactions,an auditor is primarily...

Question 10

A surprise observation by an auditor of a client's regular distribution of paychecks is primarily designed to satisfy the auditor that
A) All unclaimed payroll checks are properly returned to the cashier.
B) The paymaster is not involved in the distribution of payroll checks.
C) All employees have in their possession proper employee identification.
D) Names on the company payroll are those of bona fide employees presently on the job.

Accepted Answer

The surprise observation of the regular distribution of paychecks is primarily designed to satisfy the auditor that names on the company payroll are those of bona fide employees presently on the job. This is to ensure that nonexistent or improper payments are not made to individuals who do not work for the company. The other options may also be part of the auditor's responsibilities but are secondary to the main objective of verifying valid employee paychecks.

Question 11

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?
A) Payroll transactions are properly disclosed.
B) Recorded payroll transactions are valid.
C) Payroll transactions are recorded in the appropriate time period.
D) All payroll transactions have been recorded.

Accepted Answer

The validity of recorded payroll transactions is likely to be a larger concern in the audit of the payroll cycle. Payroll is one of the largest expenses for most organizations and is subject to various laws and regulations requiring proper calculation and withholding of taxes and other deductions. Inaccurate or fraudulent payroll transactions can result in significant financial losses and legal liabilities. Therefore, ensuring that recorded payroll transactions are valid is a critical internal control objective in the payroll cycle that auditors need to evaluate.

Question 12

Tests of details of transactions are often conducted in conjunction with tests of controls.

Accepted Answer

Tests of details of transactions and tests of controls are often intertwined and conducted together to obtain a thorough understanding of the effectiveness of an organization's internal controls.

Question 13

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?
A) Human resource.
B) Treasurer.
C) Controller.
D) Payroll.

Accepted Answer

The answer of Which of the following departments most likely...

Question 14

If the results of the control tests do not support the planned level of control risk,the detection risk will have to be set higher.

Accepted Answer

If the results of the control tests do not support the planned level of control risk, the auditor would lower the detection risk to achieve the desired level of audit risk, often by performing more substantive testing.

Question 15

Proper segregation of duties is critical for the human resource management process.

Accepted Answer

Proper segregation of duties helps to prevent fraud or errors in the HR management process, as it ensures that no one person has complete control over all functions. This helps to maintain checks and balances, and ensures that the HR processes are transparent, accurate, and reliable.

Question 16

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

Accepted Answer

Inherent risk associated with officer compensation is often high because officers have the motive and opportunity to manipulate their compensation to their advantage due to their high-ranking positions.

Question 17

An auditor vouched data for a sample of employees in a payroll register to approved clock card/time sheet data to provide assurance that
A) Payments to employees are computed at authorized rates.
B) Employees worked the number of hours for which they are paid.
C) Segregation of duties exist between the preparation and distribution of the payroll.
D) Internal controls relating to unclaimed payroll checks are operating effectively.

Accepted Answer

Vouching data for a sample of employees in a payroll register to approved clock card/time sheet data provides assurance that employees worked the number of hours for which they are paid. This is related to the accuracy of the payroll, which is important in ensuring that employees are paid correctly for the work they have done. The other choices (A, C, and D) are also important considerations in a payroll system, but they are not directly related to the task of vouching data for a sample of employees.

Question 18

Which of the following could test the assertion of cutoff for payroll-related liabilities?
A) Compare items in accrued payroll taxes to the supporting payroll tax return.
B) Search for unrecorded liabilities.
C) Examine payroll tax returns to determine that the expense was recorded in the proper period.
D) Review payroll liabilities for proper classification as short-or long-term.

Accepted Answer

The answer of Which of the following could test the...

Question 19

All of the following are incorporated into valuation models except:
A) The exercise price of the option.
B) The term of the option.
C) Expected dividends.
D) Current tax rates.

Accepted Answer

Current tax rates are not incorporated into valuation models for options. Valuation models consider the exercise price, term, expected dividends, and other relevant factors to determine the value of an option. However, tax rates are not typically a significant factor in these calculations.

Question 20

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except:
A) Payments to fictitious employees.
B) Payments to terminated employees.
C) Payments to valid employees who have not worked.
D) Payments to valid employees at a rate in excess of the authorized amount.

Accepted Answer

The occurrence assertion for payroll transactions relates to the occurrence of payments to valid employees for actual work performed. Misstatements related to this assertion would involve payments made for invalid reasons, such as to fictitious employees, terminated employees, or valid employees who did not work. However, payments made to valid employees at a rate in excess of the authorized amount relate to the accuracy assertion rather than the occurrence assertion.

Quiz 12: Auditing the Human Resource Management Process

The proper use of prenumbered termination notice forms by the Payroll Department should provide assurance that all

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

Employees must complete a W-4 form to authorize insurance deductions from his or her pay.

Which of the following could test the assertion of classification for payroll-related liabilities?

The human resource function is responsible for managing the personnel needs of the organization.

The payroll-processing function is responsible for paying employees for services and benefits.

Which of the following circumstances most likely would cause an auditor to suspect an employee payroll fraud scheme?

Payroll-related expenses normally are not a material cost to the organization.

When examining payroll transactions,an auditor is primarily concerned with the possibility of

A surprise observation by an auditor of a client's regular distribution of paychecks is primarily designed to satisfy the auditor that

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?

Tests of details of transactions are often conducted in conjunction with tests of controls.

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

If the results of the control tests do not support the planned level of control risk,the detection risk will have to be set higher.

Proper segregation of duties is critical for the human resource management process.

Inherent risk associated with officer compensation is frequently set high because officers have motive and opportunity to take advantage of their high-ranking offices in the form of excessive compensation.

An auditor vouched data for a sample of employees in a payroll register to approved clock card/time sheet data to provide assurance that

Which of the following could test the assertion of cutoff for payroll-related liabilities?

All of the following are incorporated into valuation models except:

Possible misstatements related to the occurrence assertion for payroll transactions include all of the following except: