Chapter 12 – Auditing the Human Resource Management Process
1. Payroll-related expenses normally are not a material cost to the organization.
2. Employees must complete a W-4 form to authorize insurance deductions from his or her
pay.
3. The human resource function is responsible for managing the personnel needs of the
organization.
Chapter 12 – Auditing the Human Resource Management Process
4. The payroll-processing function is responsible for paying employees for services and
benefits.
5. Proper segregation of duties is critical for the human resource management process.
6. There are few inherent risk factors that directly affect the human resource management
process and its related accounts for non-officers.
Chapter 12 – Auditing the Human Resource Management Process
7. Inherent risk associated with officer compensation is frequently set high because officers
have motive and opportunity to take advantage of their high-ranking offices in the form of
excessive compensation.
8. If the results of the control tests do not support the planned level of control risk, the detection
risk will have to be set higher.
9. Tests of details of transactions are often conducted in conjunction with tests of controls.
Chapter 12 – Auditing the Human Resource Management Process
10. Which of the following departments most likely would approve changes in pay rates and
deductions from employee salaries?
11. Possible misstatements related to the occurrence assertion for payroll transactions include
all of the following except:
Chapter 12 – Auditing the Human Resource Management Process
12. The proper use of prenumbered termination notice forms by the Payroll Department should
provide assurance that all
13. When examining payroll transactions, an auditor is primarily concerned with the possibility
of
Chapter 12 – Auditing the Human Resource Management Process
14. An auditor vouched data for a sample of employees in a payroll register to approved clock
card/time sheet data to provide assurance that
15. Which of the following internal control objectives is likely to be a larger concern in the
audit of the payroll cycle?
Chapter 12 – Auditing the Human Resource Management Process
16. Which of the following circumstances most likely would cause an auditor to suspect an
employee payroll fraud scheme?
17. Which of the following could test the assertion of cutoff for payroll-related liabilities?
18. Which of the following could test the assertion of classification for payroll-related
liabilities?
Chapter 12 – Auditing the Human Resource Management Process
19. All of the following are incorporated into valuation models except:
20. A surprise observation by an auditor of a client’s regular distribution of paychecks is
Chapter 12 – Auditing the Human Resource Management Process
21. Which of the following is the best reason why an auditor should consider observing a
client’s distribution of regular payroll checks?
22. The purpose of segregating the duties of distributing payroll checks and hiring personnel is
to separate the
Chapter 12 – Auditing the Human Resource Management Process
23. The purpose of segregating the duties of hiring personnel and distributing payroll checks is
24. Which of the following is an effective internal control used to prove that production
department employees are properly validating payroll timecards at a time-recording station?
Chapter 12 – Auditing the Human Resource Management Process
25. A large retail enterprise has established a policy that requires that the paymaster deliver all
unclaimed payroll checks to the Internal Auditing Department at the end of each payroll
distribution day. This policy was most likely adopted in order to
26. In the weekly computer run to prepare payroll checks, a check was printed for an employee
who had been terminated the previous week. Which of the following controls, if properly
utilized, would have been most effective in preventing the error or ensuring its prompt
detection?
Chapter 12 – Auditing the Human Resource Management Process
27. Which of the following is the best way for an auditor to determine that every name on a
company’s payroll is that of a bona fide employee presently on the job?
28. Transactions processed through the payroll process include all of the following except:
Chapter 12 – Auditing the Human Resource Management Process
29. Vouching selected items from the payroll register to employee time cards that have been
approved by supervisory personnel provides evidence that
30. Which of the following activities most likely would detect whether payroll data are
accurately processed?
Chapter 12 – Auditing the Human Resource Management Process
31. When control risk is assessed as low for assertions related to payroll, substantive tests of
payroll balances most likely would be limited to applying substantive analytical procedures
32. Which of the following procedures would normally be performed by the auditor when
conducting tests of payroll transactions?
Chapter 12 – Auditing the Human Resource Management Process
33. A substantive test of transactions to test the completeness assertion includes
34. Comparing selected items from the payroll register to employee time records that have been
approved by supervisory personnel tests which of the following assertions for payroll expense?
35. An auditor most likely would extend substantive tests of payroll when
Chapter 12 – Auditing the Human Resource Management Process
36. Which of the following could test the occurrence assertion for payroll-related liabilities?
37. Which of the following is required of an auditor who is testing the fair value of options in
share-based compensation?
38. In an IT payroll system environment, an auditor would be least likely to use test data to test
controls related to
Chapter 12 – Auditing the Human Resource Management Process
39. Effective internal control over unclaimed payroll checks that are kept by the Treasury
Department would include Accounting Department procedures that require
40. Effective internal control over the payroll function would include which of the following?