Which of the following is TRUE of good internal controls over payroll?
A) Accounting for payroll should be separate from hiring and firing of employees.
B) Disbursement of paychecks should not be separate from the function of maintaining payroll records.
C) Hiring and firing employees should not be separated from accounting and from disbursing paychecks.
D) Cash receipts from customers should be separated from the accounting for accounts receivable.

Question

Quizplus · Accepted Answer

Separating the function of accounting for payroll from the function of hiring and firing employees helps to prevent the possibility of fraudulent payroll schemes. This segregation of duties ensures that no single employee has complete control over the process, which reduces the risk of errors, omissions, or intentional misconduct. Disbursing paychecks should also be separate to prevent the possibility of duplicate or unauthorized payments. However, there is no direct relationship between payroll controls and cash receipts or accounts receivable, so options B and D are incorrect. Option C is incorrect because it suggests that hiring and firing should be combined with accounting and/or disbursement functions, which violates the principle of segregation of duties.

Which of the Following Is TRUE of Good Internal Controls