Unit 3 - Module 5

Question 1

Data Flow Diagram of Payroll Procedurs

Answer 1

Question 2

personnel action forms

Answer 2

Document identifying employees authorized to receive a paycheck; the form is used to reflect changes in pay rates, payroll deductions, and job classification.

Question 3

Job tickets

Answer 3

Mechanisms to capture the time that individual workers spend on each production job.

Question 4

Time cards

Answer 4

Tool to capture the time the employee is at work.

Question 5

labor distribution summary

Answer 5

Summarization of labor costs in work-in-process accounts.

Question 6

employee payroll records

Answer 6

System an employer uses to calculate, track, and report employee pay.

Question 7

paychecks

Answer 7

A bank check given as salary or wages.

Question 8

Basic Technology Payroll System

Answer 8

Question 9

human resource management (HRM) system

Answer 9

Captures and processes a wide range of personnel-related data, including employee benefits, labor resource planning, employee relations, employee skills, and personnel actions (pay rates, deductions, and so on), as well as payroll. HRM systems need to provide real-time access to personnel files for purposes of direct inquiries and recording changes in employee status as they occur.

Question 10

Integrated Payroll and HRM System

Answer 10

Question 11

labor usage file

Answer 11

File in which the cost accounting department enters job cost data (real time or daily).

Question 12

time and attendance file

Answer 12

Generated by employees directly entering timekeeping data in real time.

Question 13

Biometric time clocks

Answer 13

Verify employees’ identities by using fingerprint or hand-vein scan technology.

Question 14

Magnetic swipe ID cards

Answer 14

Works like a credit card. Each employee is issued an ID card that has a magnetic strip containing employee information. The employee swipes the card through the time clock to record start and end time on the job.

Question 15

Proximity cards

Answer 15

They are similar to swipe cards but don’t require the user to slide the card through a reader.

Question 16

Mobile remote devices

Answer 16

Allow employees to clock in using handheld devices (PDA or cell phone) or web browsers from laptop computers. This option is popular among businesses with employees in the field who travel between clients and with companies engaged in global business with foreign-based employees.

Question 17

employee records file

Answer 17

Comprises the additions of new employees, deletions of terminated employees, changes in work dependents, changes in withholdings, and changes in job status such as job title and pay rate. Human resources clerks enter data into the employee records file in real time from terminals.

Question 18

The following are the primary risks associated with payroll system transactions:

Answer 18

-Inaccurately recording payroll transactions in accounts.
-Misappropriation of cash through payroll fraud.
-Unauthorized access to payroll records and confidential employee data.

Question 19

The following outlines some possible payroll system errors:

Answer 19

-Time and attendance data are incorrectly calculated.
-Wages payable go unrecorded or are recorded in the wrong period.
-Employee earnings and cash payments are inaccurately posted to employee records or are posted to the wrong employee.
-Payroll register, AP, and cash disbursements amounts are incorrectly posted to their respective GL accounts.

Question 20

The audit trail for payroll includes the following documents:

Answer 20

1. Time cards, job tickets, and disbursement vouchers.
2. Journal information, which comes from the labor distribution summary and the payroll register.
3. Subsidiary ledger accounts, which contain the employee records, WIP, and various expense accounts.
4. The GL accounts, which contain payroll control, cash, and the payroll clearing (imprest) account.

Question 21

IT input controls to reduce these risks include the following:

Answer 21

1. Limit tests to detect excessive hours reported per period.
2. Biometric scanners, swipe cards, and PINs reduce the risk of payroll fraud by ensuring that individuals clocking into the system are valid employees.
3. Automated tests to validate employee time cards against a valid and up-to-date employee file.
4. Paycheck direct deposit options for employees.

Question 22

The motives for accessing accounting information include:

Answer 22

• Malicious acts such as corrupting or deleting payroll data.
• Theft of confidential employee information such as social security numbers, pay rates, and other personal data.
• Attempts to perpetrate a payroll fraud.

Question 23

Fixed assets

Answer 23

Property, plant, and equipment used in the operation of a business.

Question 24

The specific objectives of the fixed asset system are to:

Answer 24

1. Process the acquisition of fixed assets as needed and in accordance with formal management approval and procedures.
2. Maintain adequate accounting records of asset acquisition, cost, description, and physical location in the organization.
3. Maintain accurate depreciation records for depreciable assets in accordance with acceptable methods.
4. Provide management with information to help plan for future fixed asset investments.
5. Properly record the retirement and disposal of fixed assets.

Question 25

Data Flow Diagram for Fixed Asset System

Answer 25

Question 26

Asset acquisition

Answer 26

Obtaining a new asset or replacing an existing one.

Question 27

Asset maintenance

Answer 27

Adjusting the fixed asset subsidiary account balances as the assets (excluding land) depreciate over time or with usage.

Question 28

depreciation schedule

Answer 28

Record used to initiate depreciation calculations.

Question 29

asset disposal

Answer 29

When an asset has reached the end of its useful life or when management decides to dispose of it, the asset must be removed from the fixed asset subsidiary ledger.

Question 30

Computer-Based Fixed Asset System

Answer 30

Question 31

Asset Status Report

Answer 31

Question 32

The fixed asset system records the

employee salaries.
purchase of a new plant.
purchase of raw materials.
sale of goods to customers.

Answer 32

purchase of a new plant.

The correct answer is “purchase of a new plant.” The fixed asset system records the purchase of a new plant. The fixed asset system records property, plant, and equipment used in the operation of the business. These represent the largest investments of the firm.

Question 33

In a technology enabled payroll system, Personnel, Time Keeping, Payroll, and Accounts Payable connect to which department to pay employees?

receiving
general ledger
cash disbursements
accounts receivable

Answer 33

cash disbursements

The correct answer is “cash disbursements.” In a technology-enabled payroll system, Personnel, Time Keeping, Payroll and Accounts Payable connect to cash disbursements to pay employees. Personnel inputs the basic employee information and rate of pay; Time Keeping collects hours worked and verifies time cards; Payroll inputs the hours worked into the payroll system which calculates gross and net pay, taxes, and other deductions; Accounts Payable approves the payment amount; and finally cash disbursements issues pay checks or direct deposit. The general ledger will be updated after the cash disbursement occurs.

Question 34

An important reconciliation in the payroll system is

-personnel compare the number of employees authorized to receive a paycheck to the number of paychecks prepared.
-general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable.
-payroll compares the labor distribution summary to the hours reported on time cards.
-production compares the number of hours reported on job tickets to the number of hours reported on time cards.

Answer 34

-general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable.

The correct answer is “general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable.” An important reconciliation in the payroll system is that the general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable. Cost accounting will be tracking the job tickets to properly account for work in process. Accounts payable will produce a disbursement voucher based on input from timecards. Job tickets and timecards should match when hours and hourly rates are extended.

Question 35

Which of the following situations represents an internal control weakness?

-Timekeeping is independent of the payroll department.
-Using IT system security, personnel is responsible for updating employee records, including creation of records for new hires.
-Paychecks are distributed by the employees’ immediate supervisor.
-Timecards are reconciled with job tickets.

Answer 35

-Paychecks are distributed by the employees’ immediate supervisor.

The correct answer is “Paychecks are distributed by the employees’ immediate supervisor.” The distribution of paychecks by the employees’ immediate supervisor is an internal control weakness. Paychecks should go directly to employees either by mail or through direct deposit. Giving the responsibility for distribution to the supervisor creates the possibility of loss, theft, or withholding of pay from an employee that the supervisor simply does not like. An additional risk arises if the employee is absent on payday and the supervisor has no secure storage for the check until the employee is back.

Question 36

Which of the following is NOT a reasonable control for fixed assets?

-Depreciation policies are in writing.
-Fully depreciated assets are disposed of immediately.
-Proper authorization is required for acquisition and disposal of fixed assets.
-Fixed asset records show the location of each asset.

Answer 36

-Fully depreciated assets are disposed of immediately.

The correct answer is “Fully depreciated assets are disposed of immediately.” Requiring that fully depreciated assets be disposed of immediately is not a reasonable control for fixed assets. Fully depreciated assets may have years of useful life remaining. For example, manufacturing machinery may be depreciated over three years but many factories use machines that are 10, 15, or 20 years old if they are well maintained.