Question

Requirement d. For each control, list a specific misstatement that could result from the absence of the control. (Use each letter corresponding to a specific misstatement only once.) (Click the icon to view the misstatements likely to result from the absence of the controls.) i Misstatements due to absence of the control A fictitious payroll check could be processed for a fictitious employee if invalid employee numbers J. are included in the employee master file. A fictitious payroll check could be processed for a fictitious employee if those with record keeping responsibilities are allowed to enter new employee numbers into the master file. Also, paychecks to valid employees could be overstated if unauthorized personnel have the ability to make changes to K. the pay rates in the master files. Internal control Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee's background, former employers, 1. and references. Approval of department head or foreman on time records is required before preparing 2. payroll. All prenumbered time records are accounted for before beginning data entry for preparation 3. of payroll. The payroll accounting software calculates gross and not pay based on hours inputted and Information in employee master files, and payroll accounting personnel double-check the 4. mathematical accuracy on a test basis. The payroll accounting software application will not accept data input for an employee 5. number not contained in the employee master file. Persons preparing the payroll do not perform other payroll duties (e.g., human resources or 6. approval of time records) nor do they have access to payroll data master files or cash. Written termination notices, with properly documented reasons for termination, and approval 7. by an appropriate official are required. All checks and notices of electronic payments not distributed to employees are returned to 8. the treasurer for safekeeping and follow-up. Online ability to add employees or change pay rates to the payroll master file is restricted via 9. passwords to authorized human resource personnel. L. A terminated employee could be continued on the payroll with someone else obtaining the paycheck. An employee could be claiming too many hours by having a friend punch him or her in early, or by M. making manual changes on time cards. 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 N. short period of time and to prevent employee dissatisfaction from failure to pay them. Checks could be lost that were intended for absent employees or a check could be taken by the 0. person responsible for distributing the checks. 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 P. 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. Several types of intentional misstatements could occur if a dishonest person is hired. Similarly, R. several types of unintentional errors could occur if an incompetent person is hired. Choose from any drop-down list and then continue to the next question.

Answer 1

INTERNAL CONTROL	MISSTATEMENT DUE TO ABSENCE OF CONTROL
1	R
2	N
3	M
4	Q
5	J
6	P
7	L
8	O
9	K