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Chapter $14$ Personnel and Payroll $($Make sure to answer each question$).$

$1.$ Which of the following statements best explains why the accuracy of payroll calculations and of payroll account distribution is critical to an auditor?

a$.$ Employees will complain to management if their paychecks do not reflect wages or salaries earned.

b$.$ Payroll is paid in cash, an account that is highly susceptible to fraud.

c$.$ Generally accepted auditing standards require that tests of cash and payroll be coordinated.

d$.$ Payroll impacts several balance sheet and income statement accounts.

$2.$ Disagreement between amounts recorded in a payroll register and a payroll summary could suggest:

a$.$ Dismissed employees who remain on the payroll.

b$.$ Miscalculated payroll.

c$.$ Inaccurate job costing records.

d$.$ Inappropriate payroll deductions.

$3.$ Procedures for wage$-$rate adjustments is an example of a control for:

a$.$ Transaction authorization.

b$.$ Transaction execution.

c$.$ Segregation of duties.

d$.$ Access to assets.

$4.$ Which of the following is a record of gross pay, withholding, and deductions?

a$.$ Payroll register

b$.$ Time record

c$.$ Employee earnings record

d$.$ Personnel record

$5.$ Obtaining an understanding of internal control over personnel and payroll does not include:

a$.$ Performing a preliminary review.

b$.$ Documenting the system.

c$.$ Performing a transaction walkthrough.

d$.$ A payroll payoff.

$6.$ Tests of controls over personnel and payroll focus on the preparation, distribution, and recording of earned salaries and wages. Which of the following is the primary source from which tests of personnel and payroll are derived?

a$.$ Time records

a$.$ b$.$ Labor distribution summary

b$.$ Employee earnings record

c$.$ Payroll register

$7.$ Why does an auditor examine postings to employee cumulative earnings records?

a$.$ Undetected errors would accumulate across years, making subsequent payroll accounts misstated.

b$.$ Cumulative earnings records are the basis for preparing W$-2$ forms and for calculating payroll tax expense.

c$.$ To detect unreported employee terminations.

d$.$ To detect overstated wages paid to undeserving employees.

$8.$ On a surprise basis, an auditor may elect to distribute paychecks to employees personally. What is the primary purpose of this audit procedure?

a$.$ To assure that no extra payroll checks are prepared and distributed.

b$.$ To test whether all paid employees exist.

c$.$ To assure that paychecks are not distributed to an employee absent on the day the auditor distributes checks.

d$.$ To test the procedures for distributing paychecks.

$9.$ Considering internal control over personnel and payroll is least likely to include:

a$.$ Identifying control objectives.

b$.$ Considering potential errors or frauds that might occur.

c$.$ Determining control procedures management uses.

d$.$ Designing substantive tests.

$10.$ Which of the following is likely an ineffective test of personnel records and a payroll register?

a$.$ Compare pay rates and payroll deduction information in personnel records with entries in the payroll register.

b$.$ Recalculate withholdings.

c$.$ Trace sampled entries in the payroll register to postings in employee cumulative earnings records.

d$.$ Examine files for completeness.

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