Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 20, Problem 17.1MCQ
To determine
Identify the audit proposition which evidences that selected items from the payroll are traced to employee time records that have been approved by supervisory personnel.
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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?
Describe the manner in which each of the above controls might be tested.
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.
Which of the following activities performed by a department supervisor most likely would help to prevent or detect a payroll fraud?a. Distributing paychecks directly to department employees.b. Setting the pay rate for departmental employees.c. Hiring employees and authorizing them to be added to payroll.d. Approving a summary of hours each employee worked during the pay period.
Chapter 20 Solutions
Auditing And Assurance Services
Ch. 20 - Prob. 1RQCh. 20 - Prob. 2RQCh. 20 - Distinguish among a payroll master file, a W-2...Ch. 20 - Prob. 4RQCh. 20 - Prob. 5RQCh. 20 - Prob. 6RQCh. 20 - Prob. 7RQCh. 20 - Prob. 8RQCh. 20 - Prob. 9RQCh. 20 - Prob. 10RQ
Ch. 20 - Prob. 11RQCh. 20 - Prob. 12RQCh. 20 - Prob. 13RQCh. 20 - Prob. 14RQCh. 20 - Prob. 15RQCh. 20 - Prob. 16.1MCQCh. 20 - Prob. 16.2MCQCh. 20 - Prob. 16.3MCQCh. 20 - Prob. 17.1MCQCh. 20 - Prob. 17.2MCQCh. 20 - Prob. 17.3MCQCh. 20 - Prob. 18.1MCQCh. 20 - Prob. 18.2MCQCh. 20 - Prob. 18.3MCQCh. 20 - Prob. 19DQPCh. 20 - Prob. 20DQPCh. 20 - Prob. 21DQPCh. 20 - Prob. 22DQPCh. 20 - Prob. 23DQPCh. 20 - Prob. 24DQPCh. 20 - Prob. 25DQPCh. 20 - Prob. 26DQPCh. 20 - Prob. 27DQPCh. 20 - Prob. 28C
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- nternal Control Questionnaire Items: Assertions, Tests of Controls, and PossibleErrors or Frauds. Following is a selection of items from the payroll processing internalcontrol questionnaire in Exhibit 5.15.1. Are names of terminated employees reported in writing to the payroll department?2. Are authorizations for deductions signed by the employee on file?3. Is there a timekeeping department (function) independent of the payroll department?4. Are timekeeping and cost accounting records (such as hours, dollars) reconciled withpayroll department calculations of hours and wages?Required:For each of the four preceding questions:a. Identify the assertion to which the question applies.b. Specify one test of controls an auditor could use to determine whether the control wasoperating effectively.c. Provide an example of an error or fraud that could occur if the control were absent orineffective.d. Identify a substantive auditing procedure that could detect errors or frauds that couldresult from…arrow_forwardBelow are some audit procedures. Classify each procedure according to the following types of audit evidence: 1) inspection, 2) external confirmation, 3) recalculation, 4) observation, 5) inquiry of the client, 6) reperformance, and 7) analytical procedure. (each procedure can be used more than once or not at all) Audit Procedures Count inventory items and record the amount in the audit working papers. Stand by the payroll time clock to determine whether any employee "punches in" more than one time. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year. Obtain information about the client's internal controls by asking questions of client personnel. Examine the purchase invoice for a piece of equipment and ensure that the equipment was received and is in operation. The auditor computes the debt covenant based on the financial information to ensure that the client's calculation was performed correctly. Obtain…arrow_forwardAn audit team most likely would assess control risk at the maximum if the payroll department supervisor is responsible fora. Examining authorization forms for new employees.b. Comparing payroll registers with original batch transmittal data.c. Authorizing payroll rate changes for all employees.d. Hiring all subordinate payroll department employees.arrow_forward
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