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Auditing & Assurance 101 Practice Test: Audit of the Payroll and Personnel Cycle
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The audit of the payroll and personnel cycle evaluates whether account balances are fairly stated in accordance with generally accepted accounting principles.  Here are some objectives of a payroll audit: Accuracy: Ensure that all payroll components are correctly calculated Completeness: Verify that salary and benefit components have been processed for all employees and paid out within the specified pay periods Compliance: Ensure compliance with various tax laws and local labor regulations  Here are some benefits of a payroll audit: Improved employee satisfaction, Payroll risk... Show more
Auditing & Assurance 101 Practice Test: Audit of the Payroll and Personnel Cycle
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25 Questions

1. Which of the following errors gives the auditor the least concern in auditing payroll transactions?
2. In auditing payroll, which of the following procedures will normally require the least amount of auditor time under normal circumstances?
3. The primary concern in testing payroll-related liabilities is to make sure that:
4. The most important consideration in evaluating the fairness of the amounts accrued for vacation pay, sick pay, and other benefits is the:
5. As a part of the auditor's responsibility for ________, the auditor should review the preparation of at least one of each type of payroll tax form the client is responsible for filing.
6. Which department should be authorized to add and delete employees from the payroll or change pay rates and deductions?
7. For proper internal control, the person(s) responsible for signing the payroll checks should not have access to timekeeping or be otherwise involved in the preparation of payroll.
8. Auditors seldom expect to find misstatements when testing payroll transactions.
9. Many companies use outside payroll services to process payroll. Which of the following regarding the auditors responsibilities is most correct regarding their reliance on the internal controls of these outside payroll services?
10. The computer file used for recording payroll transactions for each employee and maintaining total wages paid for the year to date is the:
11. Payroll checks should be distributed by someone independent of the payroll and timekeeping functions.
12. Because of confidentiality requirements and potential losses of payroll funds, outside service center systems are rarely used by companies for payroll-related functions.
13. Paying employees for their services ends the payroll and personnel cycle.
14. Which of the following is the best way for an auditor to determine that every name on a company's payroll for the Rodgers factory is that of a bona fide employee presently on the job?
15. The deduction authorization form authorizes the rate of pay and the deductions for taxes, dues, etc.
16. You are responsible for the audit of payroll. You have assessed control risk as low for the payroll transactions. Substantive tests of payroll would most likely be limited to analytical procedures and:
17. Which of the following is not a procedure that can be performed on canceled checks in an effort to detect defalcations?
18. Which of the following audit procedures would be most useful in testing the cut-off audit objective for payroll-related liabilities?
19. Which of the following is a major balance-related audit objective in testing payroll liabilities?
20. The auditor, in auditing payroll, wants to determine that the individuals included in her sample were employees of the company for the period under review. What is the auditor's best source of evidence?
21. Which of the following is not an assertion related to the classes of transactions underlying the payroll cycle?
22. Despite the large dollar amounts involved in the payroll and personnel cycle, auditors typically spend less time auditing this cycle than others.
23. There is very little opportunity for confirmation from third parties of balance sheet accounts related to the payroll and personnel cycle.
24. No individual with access to time cards, payroll records, or checks should also be permitted access to:
25. Which of the following best describes effective internal control over payroll?

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