2. Frauds involving Payroll The major payroll-related frauds include a. Fictitious Employees Adding fictitious employees to the payroll is one of the most common defalcations. Detecting fictitious employees on the payroll is very difficult; but auditors do sometimes perform a surprise payoff as a deterrent to this form of defalcation. Alternatively, the auditor may turn the check distribution over to an official not associated with preparing payroll, signing checks, or supervising workers. Personnel files and the employees' completed time cards and time tickets may also be

2. Frauds involving Payroll The major payroll-related frauds include a. Fictitious Employees Adding fictitious employees to the payroll is one of the most common defalcations. Detecting fictitious employees on the payroll is very difficult; but auditors do sometimes perform a surprise payoff as a deterrent to this form of defalcation. Alternatively, the auditor may turn the check distribution over to an official not associated with preparing payroll, signing checks, or supervising workers. Personnel files and the employees' completed time cards and time tickets may also be

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance

Section: Chapter Questions

Problem 12CYBK

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Similar questions

What is NOT an example of internal control procedures that help prevent payroll fraud? a.Outsource Payroll Administration b.Require mandatory vacations c.Make sure only one person handles payroll functions d.Conduct periodic unannounced audits
Which of the following activities most likely would be considered a weakness in an entity’s internal control over payroll?a. A voucher for the amount of the payroll is prepared in the general accounting department based on the payroll department’s payroll summary. b. Payroll checks are prepared by the accounts payable department and signed by the treasurer. c. The employee who distributes payroll check returns unclaimed payroll checks to the payroll department. d. The personnel department sends employees’ termination notices to the payroll department.
The following are typical questions that might appear on an internal control questionnaire for payroll activities: 1. Is there adequate separation of duties between employees who maintain human resources records and employees who approve payroll disbursements? 2. Is there adequate separation of duties between personnel who maintain timekeeping or attendance records for employees and employees who distribute payroll checks? Assuming that the operating effectiveness of each of the above controls is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of control risk.
What documents does a perpetrator use to commit billing fraud? example? What are the three categories in payroll fraud? example?
What internal control or procedure(s) would provide protection against the following threats? A company is late in paying a particular invoice. Consequently, a second invoice is sent, which crosses the first invoice’s payment in the mail. The second invoice is submitted for processing and also paid. A clerical employee obtains a blank check and writes a large amount payable to a fictitious company. The employee then cashes the check A fictitious invoice is received and a check is issued to pay for goods that were never ordered or delivered A purchasing agent adds a new record to the supplier master file. The company does not exist. Subsequently, the purchasing agent submits invoices from the fake company for various cleaning services. The invoices are paid. Cash disbursement department updates account payable once payment is due.
Evaluate the difficulties associated with preventing and detecting payroll fraud.
What are the most frequent mistakes and scams that occur in the payroll and personnel processes?? In order to avoid or discover these blunders and scams, what are auditors searching for?
Figure 4.1 below presents the payroll procedures of AAA Limited. We discussed various aspects of such payroll procedures. In the light of that discussion, identify the potential frauds possible in the payroll system of AAA Limited. Also, discuss the control techniques to avoid these frauds. [Word Limit: Up to 200 words]