Question 1

To best ensure that employees are paid authorized rates,the auditor should trace wage rates from the ________.
A)master files to payroll journal
B)payroll journal to master files
C)personnel files to master files
D)cheque register to payroll journal

Accepted Answer

Tracing wage rates from personnel files to master files ensures that the rates paid to employees are authorized and documented, as personnel files typically contain official records of employment agreements, including authorized wage rates.

Question 2

Selecting a sample of time clock cards and examining them for evidence of approval by a supervisor then tracing the hours recorded to the payroll registers is a procedure designed to obtain evidence about the control objective(s)of ________.
A)validity only
B)authorization only
C)completeness only
D)authorization and completeness.

Accepted Answer

The procedure of selecting time clock cards, examining supervisor approval, and tracing hours to the payroll registers is designed to obtain evidence about both authorization and completeness. Authorization is ensured by the supervisor approval, while completeness is ensured by tracing the recorded hours to the payroll registers.

Question 3

Cost accounting can be performed by those who also ________.
A)authorize production
B)allocate overhead charges
C)have custody of assets
D)reconcile labour reports

Accepted Answer

Cost accounting involves the allocation of overhead charges, which is the responsibility of those who perform cost accounting. Authorization of production, custody of assets, and reconciliation of labor reports are all separate responsibilities that may or may not be performed by those who also perform cost accounting.

Question 4

A bill of materials is associated with which duty?
A)Authorization.
B)Custody.
C)Record keeping.
D)Periodic reconciliation.

Accepted Answer

The answer of A bill of materials is associated with...

Question 5

Selecting a sample of job orders from the job cost summary and matching them to bills of material and the schedule of production labour requirements is a procedure designed to test the control objective of ________.
A)accounting
B)accuracy
C)completeness
D)validity

Accepted Answer

The answer of Selecting a sample of job orders from...

Question 6

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?
A)Distributing paycheques.
B)Authorizing overtime hours.
C)Authorizing the addition or removal of employees from the payroll.
D)Collecting and retaining unclaimed paycheques.

Accepted Answer

Authorizing the addition or removal of employees from the payroll is the best choice as it ensures that only authorized employees receive payment and helps prevent the risk of payroll fraud. Distributing paycheques and collecting and retaining unclaimed paycheques are routine tasks that can be performed by non-personnel staff, while authorizing overtime hours is the responsibility of the immediate supervisor.

Question 7

Tracing selected items from the payroll register to approved,employee time cards provides evidence that ________.
A)internal controls relating to payroll disbursements were operating effectively
B)payroll cheques were signed by an appropriate officer independent of the payroll preparation process
C)only bona fide employees worked and their pay was properly computed
D)employees worked the number of hours for which their pay was computed

Accepted Answer

The answer of Tracing selected items from the payroll register...

Question 8

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.
A)examining authorization forms for new employees
B)authorizing payroll rate changes for all employees
C)comparing payroll registers with original batch transmittal data
D)hiring all subordinate payroll department employees

Accepted Answer

Authorizing payroll rate changes for all employees is a significant responsibility that has the potential to allow for fraudulent activities. If the payroll supervisor has unrestricted access to make rate changes, the risk of errors or intentional manipulation of rates is high. As such, the auditor is more likely to assess control risk at a maximum, which would result in a greater need for substantive testing of payroll transactions to ensure their accuracy.

Question 9

If controls over production accounting are found to be strong,an auditor can plan to do less testing over ________.
A)the existence assertion of inventory
B)the valuation assertion of inventory
C)the completeness assertion of inventory
D)the rights assertion over inventory

Accepted Answer

If controls over production accounting are strong, then the valuation assertion of inventory can be relied upon more, as accurate and reliable production accounting can lead to more accurate inventory valuations. However, the other assertions (existence, completeness, and rights) may still require testing to ensure their accuracy.

Question 10

Which of the following is most likely to approve changes in pay rates and deductions from employee salaries?
A)Personnel department.
B)Treasurer.
C)Controller.
D)Payroll department.

Accepted Answer

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

Question 11

The sampling unit in a test of controls relating to the validity of payroll transactions is ordinarily a(n)________.
A)clock card or time ticket
B)employee T-4 form
C)employee personnel record
D)payroll register entry

Accepted Answer

The answer of The sampling unit in a test of...

Question 12

Which of the following accounts is not considered in the production cycle?
A)Inventory.
B)Cost of goods sold.
C)Amortization expense.
D)Sales.

Accepted Answer

The answer of Which of the following accounts is not...

Question 13

Reconciling the open production cost reports to the work-in-process inventory control account is a procedure designed to test the control objective of ________.
A)environment
B)validity
C)completeness
D)authorization

Accepted Answer

Reconciling the open production cost reports to the work-in-process inventory control account ensures that all costs associated with work-in-process inventory have been recorded, therefore testing the control objective of completeness.

Question 14

Small Corporation uses a Wages Clearing Account for its payroll disbursements.At the end of February,a reasonably large debit balance remained in this account.What is the most likely reason?
A)More labour cost had been assigned to the expense accounts than had been paid.
B)Some labour cost had not been properly classified in the expense accounts.
C)Some employees had not yet cashed their cheques.
D)Not enough cash had been transferred to the bank account.

Accepted Answer

If some labour costs had not been properly classified in the expense accounts, it could have caused an imbalance in the Wages Clearing Account. Unaccounted for costs can result in a larger debit balance in the account, as these expenses would have been paid but not reflected in the expense accounts.

Question 15

Production accounting generates important information for management decisions but also is a source of audit risk because ________.
A)production accountants may not be competent
B)production processes require a lot of allocations
C)goods produced may not be marketable
D)goods claimed as produced may not exist

Accepted Answer

The answer of Production accounting generates important information for management...

Question 16

The purpose of segregating the duties of hiring personnel and distributing payroll cheques is to separate the ________.
A)human resources function from the controllership function
B)administrative controls from the internal accounting controls
C)authorization of transactions from the custody of related assets
D)operational responsibility from the record-keeping responsibility

Accepted Answer

Segregating the duties of hiring personnel and distributing payroll cheques separates the authorization of transactions (hiring and paying employees) from the custody of related assets (money used for payroll). This helps to ensure that employees who have authorization to make hiring or payment decisions do not also have access to the assets involved in those transactions.

Question 17

Selecting a sample of payroll summaries and vouching the details to time records is a procedure designed to test the control objective of ________.
A)environment
B)validity
C)completeness
D)classification

Accepted Answer

Vouching the details of payroll summaries to time records ensures that the payroll transactions recorded actually occurred and are valid, thus testing the control objective of validity.

Question 18

In the area of payroll,which of the following procedures represents proper control over the custody of assets?
A)The supervisor receives a copy of the payroll register for a chance to approve the payroll after it is completed.
B)Individual paycheques are prepared.
C)Unclaimed payroll cheques are held in the office of the chief financial officer.
D)Signatures from employees are obtained for calculation of deductions.

Accepted Answer

Holding unclaimed payroll cheques in the office of the chief financial officer ensures that these assets are properly safeguarded until they are claimed by the rightful owner. This is an important control over custody of assets. The other options do not specifically address custody of assets.

Question 19

Which of the following documents is NOT included in the payroll cycle?
A)payroll cheques
B)timekeeping records
C)termination notices
D)supplier invoices

Accepted Answer

Supplier invoices are not included in the payroll cycle. The payroll cycle typically includes timekeeping records, calculation of employee wages and deductions, issuance of payroll cheques or direct deposits, and any necessary tax reporting and remittance. Termination notices may also be included if applicable.

Question 20

Which of the following is NOT a major risk in the payroll cycle?
A)Paying fictitious employees.
B)Paying employees more than a market wage.
C)Overpayment for time or production.
D)Incorrect accounting for costs and expenses.

Accepted Answer

While paying employees more than a market wage may be a financial risk for the organization, it is not a major risk in the payroll cycle as it does not involve fraud or error in the processing or accounting for payroll transactions. The other choices involve potential fraud, errors or misstatements that can occur in the payroll process.

Quiz 13: Payroll and Production Processes

To best ensure that employees are paid authorized rates,the auditor should trace wage rates from the ________.

Selecting a sample of time clock cards and examining them for evidence of approval by a supervisor then tracing the hours recorded to the payroll registers is a procedure designed to obtain evidence about the control objective(s) of ________.

Cost accounting can be performed by those who also ________.

A bill of materials is associated with which duty?

Selecting a sample of job orders from the job cost summary and matching them to bills of material and the schedule of production labour requirements is a procedure designed to test the control objective of ________.

Which of the following procedures carried out by the personnel department best reduces the risk of payroll fraud and represents an appropriate responsibility for the department?

Tracing selected items from the payroll register to approved,employee time cards provides evidence that ________.

An auditor is most likely to assess control risk at maximum if the payroll department supervisor is responsible for ________.

If controls over production accounting are found to be strong,an auditor can plan to do less testing over ________.

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

The sampling unit in a test of controls relating to the validity of payroll transactions is ordinarily a(n) ________.

Which of the following accounts is not considered in the production cycle?

Reconciling the open production cost reports to the work-in-process inventory control account is a procedure designed to test the control objective of ________.

Small Corporation uses a Wages Clearing Account for its payroll disbursements.At the end of February,a reasonably large debit balance remained in this account.What is the most likely reason?

Production accounting generates important information for management decisions but also is a source of audit risk because ________.

The purpose of segregating the duties of hiring personnel and distributing payroll cheques is to separate the ________.

Selecting a sample of payroll summaries and vouching the details to time records is a procedure designed to test the control objective of ________.

In the area of payroll,which of the following procedures represents proper control over the custody of assets?

Which of the following documents is NOT included in the payroll cycle?

Which of the following is NOT a major risk in the payroll cycle?