SOLVED

Learning Objective 20-3 1) Which of the following statements is false? A) The payroll cycle consists of one class of transactions. B) Balance sheet accounts related to payroll are generally more significant than related transactions. C) Internal controls over payroll are effective for most companies. D) Small companies usually have effective controls over payroll. 2) Which of the following would have the least amount of importance regarding controls over the processing of payroll? A) The person authorized to sign paychecks should not be otherwise involved in the preparation of the payroll. B) A check-signing machine should not be used to replace a manual signature. C) Distribution of pay checks should be performed by someone who is not involved in the other payroll functions. D) Unclaimed paychecks should be immediately returned for redeposit. 3) Which of the following types of audit procedures is ordinarily emphasized the least when auditing payroll? A) Tests of controls B) Tests of transactions C) Analytical procedures D) Tests of details of balances 4) An auditor is vouching a sample of hourly employees from the payroll master file to approved time clock or time sheet data in order to provide evidence that: A) employees work the number of hours for which they are paid. B) payments are made at the contractual rate. C) product cost information is accurate. D) segregation of duties is present between the payroll function and the payment function for cash disbursements. 5) The payroll and personnel cycle begins with which of the following events? A) interviewing job candidates B) hiring a new employee C) existing employees submitting requests for payment for work performed D) issuance of paychecks 6) Which of the following best describes the systems of internal control for payroll for large companies ? A) loosely structured but well controlled B) loosely structured and loosely controlled C) highly structured and well controlled D) highly structured but loosely controlled 7) Which of the following internal control objectives is likely to be the most important in the audit of the payroll cycle? A) Payroll transactions are properly disclosed and presented in the notes to the financial statements. B) Payroll transactions are processed by an outside service provider. C) Recorded transactions represent valid payments. D) Recorded transactions are recorded in the proper accounting period. 8) In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can: A) Increase inventory asset valuations. Decrease inventory asset valuations. Yes Yes B) Increase inventory asset valuations. Decrease inventory asset valuations. No No C) Increase inventory asset valuations. Decrease inventory asset valuations. Yes No D) Increase inventory asset valuations. Decrease inventory asset valuations. No Yes 9) To minimize the opportunity for fraud, unclaimed salary checks should be: A) deposited in a special bank account. B) kept in the payroll department. C) left with the employee’s supervisor. D) held for the employee in the personnel department. 10) Which of the following audit procedures would be most useful in testing the cut-off audit objective for payroll-related liabilities? A) Review documentation for proper classification between long and short term liabilities. B) Compare the clients accrual of payroll liabilities with the payroll tax return. C) Examine payment tax returns to determine that the expense was recorded in the correct period. D) Examine subsequent cash disbursements to determine when the liabilities for payroll were paid.