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Audit Homeworks Flashcards
On the basis of audit evidence gathered and evaluated, an auditor decides to increase assessed control risk from that originally planned. To achieve an audit risk level (AcAR) that is substantially the same as the planned audit risk level (AAR), the auditor will
a. increase inherent risk
b. increase materiality levels
c. decrease substantive testing
d. decrease planned detection risk
d. decrease planned detection risk
An auditor uses assessed control risk to:
a. evaluate the effectiveness of the entity’s internal controls
b. identify transactions and account balances where inherent risk is at the maximum
c. indicate whether materiality thresholds for planning and evaluation purposes are sufficiently high
d. determine the acceptable level of detection risk for financial statement assertions
d. determine the acceptable level of detection risk for detection risk for financial statement assertions
The ultimate purpose of assessing control risk is to contribute to the auditor’s evaluation of the:
a. factors that raise doubts about the auditability of the financial statements
b. operating effectiveness of internal control policies and procedures
c. risk that material misstatements exist in the financial statements
d. possibility that the nature and extent of substantive tests may be reduced
c. risk that material misstatements exist in the financial statements
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- Human resource require an investigation of an employment application from new employees. Investigation includes checking the employee’s background, former employers, and references.
Proper authorization of transactions and activities
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- Approval of department head or foreman on time records is required before preparing payroll
Adequate segregation of duties and proper authorization of transactions and activities
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- All prenumbered time records are accounted for before beginning data entry for preparation of payroll
Adequate documents and records
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis
Independent check on performance
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- The payroll accounting software application will not accept data input for an employee number not contained in the employee master file
Proper authorization of transactions and activities
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
6.Persons preparing the payroll do not perform other payroll duties (e.g., human resources or approval of time records) nor do they have access to payroll data master files or cash
Adequate separation of duties
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required.
Proper authorization of transactions and activities and adequate documents and records
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up
Physical control over assets and records and adequate segregation of duties
For each internal control, identify the type(s) of specific control activity (or activities) to which it applies (such as adequate documents and records or physical control over assets and records).
- Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel
Proper authorization of transactions and activities and adequate separation of duties
For each internal control, identify the transaction related audit objective(s) to which it applies
- Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee’s background, former employers, and references.
Accuracy and Occurrence
For each internal control, identify the transaction related audit objective(s) to which it applies
- Approval of department head or foreman on time records is required before preparing payroll
Occurrence
For each internal control, identify the transaction related audit objective(s) to which it applies
- All prenumbered time records are accounted for before beginning data entry for preparation of payroll
Completeness
For each internal control, identify the transaction related audit objective(s) to which it applies
- The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis
Accuracy
For each internal control, identify the transaction related audit objective(s) to which it applies
- The payroll accounting software application will not accept data input for an employee number not contained in the employee master file
Occurrence
For each internal control, identify the transaction related audit objective(s) to which it applies
- Persons preparing the payroll do not perform other payroll duties (e.g., human resources or approval of time records) nor do they have access to payroll data master files or cash
Occurrence
For each internal control, identify the transaction related audit objective(s) to which it applies
- Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required.
Occurrence
For each internal control, identify the transaction related audit objective(s) to which it applies
- All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up
Occurrence
For each internal control, identify the transaction related audit objective(s) to which it applies
- Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel
Accuracy and Occurrence
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee’s background, former employers, and references.
E. Both errors and fraud are likely to be prevented
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- Approval of department head or foreman on time records is required before preparing payroll
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- All prenumbered time records are accounted for before beginning data entry for preparation of payroll
B. A missing time record number never could be identified before preparation of payroll starts
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- The payroll accounting software application will not accept data input for an employee number not contained in the employee master file
C. A paycheck cannot be processed for an invalid employee number
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- Persons preparing the payroll do not perform other payroll duties (e.g., human resources or approval of time records) nor do they have access to payroll data master files or cash
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required.
I. The preparation of an inappropriate payroll check for a former employee is prevented
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A. A fictitious payroll check that is originated by the person both preparing the payroll checks and distributing the payroll checks
B. A missing time record number never could be identified before preparation of payroll starts
C. A paycheck cannot be processed for an invalid employee number
D. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is temporarily laid off
E. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent employees minimizes the likelihood of unintentional errors.
F. Checks prepared for nonexistent employees or employees on vacation, or absent for other reasons, are controlled and safeguarded
G. Mechanical errors in adding the number of hours, calculating the gross payroll incorrectly, or calculating withholding incorrectly
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
I. The preparation of an inappropriate payroll check for a former employee is prevented
- Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel
H. Preparation of a check for a fictitious employee or preparation of checks using an unapproved pay rate are prevented
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee’s background, former employers, and references.
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- Approval of department head or foreman on time records is required before preparing payroll
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- All prenumbered time records are accounted for before beginning data entry for preparation of payroll
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis
Q. Payroll checks incorrectly calculated could be paid to employees
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- The payroll accounting software application will not accept data input for an employee number not contained in the employee master file
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- Persons preparing the payroll do not perform other payroll duties (e.g., human resources or approval of time records) nor do they have access to payroll data master files or cash
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
For each control, list a specific misstatement that could result from the absence of the control.
J. A fictitious payroll check could be processed for a fictious employee if invalid employee numbers are included in the employee master file
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck.
M. An employee could be claiming too many hours by having a friend punch him or her in early, or by making manual changes on time cards.
N. An employee would not be paid for a time period. (The employee is almost certain to bring this to management’s attention.) The primary benefit of the control would be to prevent misstatements for a short period of time and to prevent employee dissatisfaction from failure to pay them.
O. Checks could be lost that were intended for absent employees or a check could be taken by the person responsible for distributing the checks.
P. If one person kept a record of time, prepared the payroll, and distributed the checks, that person could add a nonexistent employee to the payroll, process the information for the employee and deposit the funds electronically or by paycheck in his or her own bank account without detection.
Q. Payroll checks incorrectly calculated could be paid to employees
R. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, several types of unintentional errors could occur if an incompetent person is hired.
- Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel
K. A fictitious payroll check could be processed for a fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter ne employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to the pay rates in the master files.
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee’s background, former employers, and references.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- Approval of department head or foreman on time records is required before preparing payroll
U. Check to see that all employees that are punched in one day are physically present
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- All prenumbered time records are accounted for before beginning data entry for preparation of payroll
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis
Z. Recheck the amounts for gross payroll, withholding and net payroll
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- The payroll accounting software application will not accept data input for an employee number not contained in the employee master file
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- Persons preparing the payroll do not perform other payroll duties (e.g., human resources or approval of time records) nor do they have access to payroll data master files or cash
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required.
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control.
S. An examination of cancelled checks or electronic payroll deposits and supporting documents, including time records and personnel records, is a test of the possibility of fraud. A test of the calculation of payroll is a test for an unintentional error caused by employees who are not competent
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
U. Check to see that all employees that are punched in one day are physically present
V. Examine cancelled checks to make certain that each check is properly endorsed, supported by a time record, and the person to whom the check is made out is still working for the company
W. Include test data transactions with invalid employee numbers to be inputted into the payroll accounting system and determine that all invalid transactions are automatically rejected by the software application
X. Obtain a list of company employees and make sure that each one has received a paycheck for the time period in question
Y. Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks or payroll direct deposit notification
Z. Recheck the amounts for gross payroll, withholding and net payroll
AA. Test month-end bank reconciliations in detail to determine that the account reconciles properly, that all supporting documents are proper, looking especially for a check that cleared and was supposed to be voided, and that no alterations have been made to the bank statement
- Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel
T. Attempt to access the online payroll master file using a password that is not allowed access to that master file.
Below are independent situations for which you will recommend an appropriate audit report on internal control over financial reporting as required by PCAOB auditing standards
- During interim testing, the auditor identified and communicated to management a significant control deficiency. Management immediately corrected the deficiency and the auditor was able to sufficiently test the newly instituted internal control before the end of the fiscal period.
Unqualified opinion on internal control over financial reporting
Below are independent situations for which you will recommend an appropriate audit report on internal control over financial reporting as required by PCAOB auditing standards
- As a result of performing tests of controls, the auditor identified a significant deficiency in internal control over financial reporting; however, the auditor does not believe that it represents a material weakness in internal control
Unqualified opinion on internal control over financial reporting
Below are independent situations for which you will recommend an appropriate audit report on internal control over financial reporting as required by PCAOB auditing standards
- The auditor determined that a deficiency in internal control exists that will not prevent or detect a material misstatement in the financial statements
Adverse opinion on internal control over financial reporting
Below are independent situations for which you will recommend an appropriate audit report on internal control over financial reporting as required by PCAOB auditing standards
- The auditor identified several significant deficiencies in internal control. Because of these significant deficiencies, the auditor believes that there is a reasonable possibility that internal control will not prevent or detect material misstatements on a timely basis
Adverse opinion on internal control over financial reporting
Below are independent situations for which you will recommend an appropriate audit report on internal control over financial reporting as required by PCAOB auditing standards
- The auditor was unable to obtain any evidence about the operating effectiveness of internal control over financial reporting
Qualified or disclaimer of opinion on internal control over financial reporting
Below are independent situations for which you will recommend an appropriate audit report on internal control over financial reporting as required by PCAOB auditing standards
- The auditor identified a material misstatement in the financial statements that was not detected by management of the company
Adverse opinion on internal control over financial reporting
