NEW
Font size
S
M
L
XL
WorksheetsQuiz 4 Payroll and Fixed Asset Systems
Total questions: 20
Worksheet time: 35mins
Name
Class
Date
1.
As an auditor you were asked important areas that needed to be reviewed in SJ Bonaventure Company’s fixed asset system. Which of the following you should do to conduct audit of fixed asset system?
a)
Review the asset acquisition and approval procedures to determine the reasonableness of key factors including: the useful life of the asset, the original financial cost, proposed cost savings because of acquiring the asset, the discount rate used, and the capital budgeting method used in justifying decisions to buy or dispose of assets.
b)
Verify the location, condition, and fair value of the organization’s fixed assets against the fixed asset records in the subsidiary ledger.
c)
The automatic depreciation charges calculated by the fixed asset system should be reviewed and verified for accuracy and completeness.
d)
All areas mentioned should be reviewed by the auditor.
2.
Which of the following is/are correct regarding the risks and control issues associated with fixed assets?
a)
In the case of high-value items, there should be an independent approval process that evaluates the merits of the request on a cost-benefit basis.
b)
Capital assets are widely distributed around the organization, they are more susceptible to theft and misappropriation than inventories that are secured in a warehouse.
c)
Supervisors must ensure that fixed assets are being used in accordance with the organization’s policies and business practices.
d)
System errors/glitches that miscalculate depreciation will not materially misstate of operating expenses, reported earnings, and asset values.
3.
Which of the following is incorrect?
a)
Fixed Asset System processes nonroutine transactions which are recorded as capital assets as compared to expenditure system.
b)
Segregation of duties is both important and implemented/present under the fixed asset system and expenditure system processes.
c)
Receiving department delivers fixed asset to the user department while for inventory expenditures to the central store or warehouse.
d)
All mentioned statements are correct.
4.
Which of the following is incorrect?
a)
The personnel action form is a document which identifies employees who should receive a paycheck; reflects changes in pay rates, payroll deductions, and job classifications.
b)
The job ticket collects information on the time individual workers spend on each production job.
c)
The time card captures the total time that an employee is at work.
d)
Labor distribution summary is a listing of all paychecks written, in check‐number sequence, with the total supporting the amount of payroll funds transferred to the payroll bank account.
5.
Where does the responsibility lie for reconciling the labor distribution summary and the payroll disbursement voucher?
a)
cash disbursements
b)
cost accounting
c)
personnel
d)
general ledger
6.
An important reconciliation in the payroll system is
a)
general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable
b)
personnel compares the number of employees authorized to receive a paycheck to the number of paychecks prepared
c)
production compares the number of hours reported on job tickets to the number of hours reported on time cards
d)
payroll compares the labor distribution summary to the hours reported on time cards
7.
Which of the following is incorrect?
a)
Payroll processing requires special accounting procedures for employee deductions and withholding taxes that do not apply to trade accounts.
b)
The task of periodically preparing large numbers of payroll checks in addition to the normal trade account checks can overload the general purchasing and cash disbursement system.
c)
Payroll process is not different among classes of employees.
d)
Combining payroll and trade transactions can encourage payroll fraud.
8.
Why would an organization require the paymaster to deliver all unclaimed paychecks to the internal audit department?
a)
to detect a “ghost employee” for whom a check was produced
b)
to prevent an absent employee’s check from being lost
c)
to avoid paying absent employees for payday
d)
to prevent the paymaster from cashing unclaimed checks
9.
Which control should be implemented to address the risk of employees clocking on and off the job be supervised?
a)
supervision of the time clock at the start of the shift
b)
using paymaster to distribute paychecks to employees in person
c)
reconciliation of time cards and job tickets
d)
separating payroll function from accounts payable function
10.
Separation of duties related to payroll register preparation, authorization of new hiring and pay rates, information systems, and general accounting would minimize the related risk of:
a)
Omitted paychecks
b)
Invalid payroll transactions, incorrect amounts, or accounts, omitted transactions
c)
Fictitious employees
d)
None of the mentioned statements
11.
IT controls over computer records and physical controls in records storage areas would minimize the risk of
a)
Incorrect amounts
b)
Lost or stolen fixed assets
c)
Invalid fixed asset transactions, incorrect amounts or accounts, timing issues, duplicate transactions
d)
None of the mentioned statements
12.
What are the factors that indicate the need for internal controls over fixed asset processes?
a)
Large quantities of fixed assets widely dispersed in various locations
b)
Frequent fixed asset changes (such as additions, transfers, and disposals)
c)
High likelihood of obsolescence due to technology changes
d)
Assets under capital leasing arrangements
e)
All the statements mentioned are factors
13.
The more employees a company has and the more frequently it pays its employees, the more important it becomes to implement strong internal controls surrounding these processes. Other conditions that may warrant the need for strong controls include:
a)
Irregular pay schedules
b)
Complex withholding arrangements
c)
Frequent changes in pay rates
d)
Decentralized payroll functions
e)
All the statements mentioned are factors
14.
This strict process for purchasing fixed assets should include at least three formal steps:
a)
Investment analysis
b)
Comparison with the capital budget
c)
Review and approval by the appropriate level of management
d)
All of the mentioned statements
15.
Which of the following is incorrect regarding corporate governance in payroll and fixed assets processes?
a)
Payroll funds and fixed assets do not belong to the managers of the organization; they are rather stewards, or temporary agents of those assets.
b)
As management assigns and oversees expenditure processes, it carries out the corporate governance function of proper management oversight.
c)
When top management acts ethically and encourages ethical behavior throughout the organization, stronger corporate governance is the result.
d)
None of the statements are incorrect.
16.
Which of the following reviews would be most likely to indicate that a company’s property, plant, and equipment accounts are not understated?
a)
Review of the company’s repairs and maintenance expense accounts
b)
Review of supporting documentation for recent equipment purchases
c)
Review and re-computation of the company’s depreciation expense accounts
d)
Review of the company’s miscellaneous revenue account.
17.
The purchase of fixed assets is likely to require different authorization processes than the purchase of inventory. Which of the following is not likely to be part of the authorization of fixed assets?
a)
Specific authorization
b)
Inclusion in the capital budget
c)
An investment analysis or feasibility analysis of the purchase
d)
Approval of the depreciation schedule
18.
Which of the following procedures would be most useful in determining the effectiveness of a company’s internal controls regarding the existence or occurrence of payroll transactions?
a)
Observe the segregation of duties concerning personnel responsibilities and payroll disbursement.
b)
Inspect evidence of accounting for prenumbered payroll checks.
c)
Recompute the payroll deductions for employee fringe benefits.
d)
Verify the preparation of the monthly payroll account bank reconciliation.
19.
Internal control problems would be likely to result if a company’s payroll department supervisor was also responsible for
a)
reviewing authorization forms for new employees
b)
comparing the payroll register with the batch transmittal data
c)
authorizing changes in employee pay rates
d)
hiring subordinates to work in the payroll department
20.
An integrated IT system of payroll and human resources may have extra risks above those of a manual system. Passwords and access logs are controls that should be used in these integrated systems to lessen the risk of
a)
hardware failures
b)
erroneous data input
c)
payroll data that does not reconcile to time cards
d)
unauthorized access to payroll data
Reset
