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Multiple Choice
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1

Which of the following is not considered an accrued payroll liability?
A)Commissions.
B)Bonuses.
C)Employee training.
D)Vacation pay.
2

Which of the following control procedures could best prevent direct labor from being charged to manufacturing overhead?
A)Comparison of daily journal entries with factory labor summary.
B)Examination of routing tickets from finished goods on delivery.
C)Reconciliation of work-in-process inventory with cost records.
D)Recomputation of direct labor based on inspection of time cards.
3

Which of the following is the best possible explanation for a manufacturing firm with a gross profit substantially higher this year in comparison with last year?
A)Not enough payroll expense was allocated to direct labor.
B)Too much payroll was allocated to direct labor.
C)Too much direct labor was allocated to cost of goods sold as opposed to ending inventory.
D)Payroll taxes were withheld at excessive rates.
4

A substantive test of transactions to test the validity audit objective includes
A)Trace a sample of time cards to the payroll register.
B)Test a sample of payroll checks for the presence of an authorized time card.
C)Test postings to the payroll register for a sample of payroll checks.
D)Recompute the accuracy of a sample of payroll checks.
5

Which of the following could test whether all payroll expense has been recorded?
A)Select a sample of items from the payroll register and find supporting time cards.
B)Select a sample of time cards and compare to related entries in the payroll register.
C)Select a sample of W-4 forms and compare to items in the payroll register.
D)Select a sample of payroll checks and compare to the related time cards.
6

In a properly designed internal control structure, an entity's payroll department would be responsible for which of the following functions?
A)Approval of employee time records.
B)Preparation of periodic reports of employee earnings and withholding taxes.
C)Temporary retention of unclaimed employee paychecks.
D)Maintenance of records of employment, termination, pay increases, etc.
7

Which of the following procedures would an auditor most likely employ to determine that every name on a client's payroll represents an actual employee that is presently employed?
A)Make a surprise observation of the client's regular distribution of paychecks.
B)Examine personnel records for accuracy and completeness.
C)Maintain control over the mailing of W-2 forms to employee addresses as listed in their personnel files.
D)Compare names listed on payroll tax returns with those in the personnel files.
8

Which of the following is not a required disclosure for payroll-related items?
A)Pensions.
B)Profit sharing plans.
C)Percentage rate of salary increases.
D)Deferred compensation arrangements.
9

Which of the following possible misstatements related to payroll does not involve the audit objective of validity?
A)Payments to fictitious employees.
B)Payments to terminated employees.
C)Payments to valid employees who have not worked.
D)Payments to valid employees at a rate in excess of the authorized amount.
10

Which of the following procedures would normally be performed by the auditor when making tests of payroll transactions?
A)Interview employees selected in a statistical sample of payroll transactions.
B)Trace number of hours worked as shown on payroll to time cards and time reports signed by the foreman.
C)Confirm amounts withheld from employees' salaries with proper governmental authorities.
D)Examine signatures on paid salary checks.





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