Which of the following would raise a red flag in the audit of payroll?
A) One person in the company is authorized to sign all payroll cheques.
B) The endorsement on a cancelled payroll cheque included the words "for deposit only" above the payee's signature.
C) The endorsement on a cancelled payroll cheque included the signature of a supervisor below the signature of the payee.
D) A supervisor initialled the time card of an employee.

Question

Quizplus · Accepted Answer

The endorsement on a cancelled payroll cheque including the signature of a supervisor below the signature of the payee suggests that the supervisor may be fraudulently cashing the cheques on behalf of the employee. This could indicate a serious breakdown in internal controls and warrants further investigation. The other options are either normal payroll procedures (A and D) or a commonly used endorsement (B).

Which of the Following Would Raise a Red Flag in the Audit