Question

Requirement e. For each control, identify one audit test that the auditor could use to uncover misstatements resulting from the absence of the control. (Letters may be used more than once.) (Click the icon to view the audit tests.) Audit test to uncover misstatements Internal control Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee's background, former employers, and 1. references. 2. Approval of department head or foreman on time records is required before preparing payroll. All prenumbered time records are accounted for before beginning data entry for preparation of 3. payroll. The payroll accounting software calculates gross and net 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 number 5. 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 by 7. an appropriate official are required. All checks and notices of electronic payments not distributed to employees are returned to the 8. 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. MED > 3 x > N &

Answer 1

1) Human resources policies require an investigation of an employment application from new employees. Investigation includes checking the employee's background, former employers, and references.	S	An examination of cancelled checks and supporting documents, including time cards and personnel records, is a test of the possibility of fraud. Atest of the calculation of payroll is a test for an unintentional errorcaused by employees who are not competent
2) Approval of department head or foreman on time records is required before preparing payroll.	U	Check to see that all employees that are punched in one day are physically present.
3) All pre numbered time records are accounted for before beginning data entry for preparation of payroll	X	Obtain a list of company employees and make sure that each one hasreceived a paycheck for the time period in question.
4) The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis	Z	Recheck the amounts for gross payroll, withholding and net payroll
5) The payroll accounting software application will not accept data input for an employee number not contained in the employee master file.	W	Include test data transactions with invalid employee numbers in thedata to be inputted into the payroll accounting system and determinethat all invalid transactions are automatically rejected by the software application
6) Persons preparing the payroll do not perform other payroll duties (e.g. timekeeping or distribution of checks) nor do they have access to payroll data master files or cash	Y	Perform a surprise payoff in which the auditor accounts for all paychecks and distributes them to the employees, who must provide identification in order to receive their checks.
7) Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required.	Y	Perform a surprise payoff in which the auditor accounts for allpaychecks and distributes them to the employees, who must provide identification to receive their checks.
8) All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up	V	Examine cancelled checks to make certain that each check is properlyendorsed, supported by a time card, and the person for whom the checkis made out is still working for the company.
9)Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel	T	Attempt to access the online payroll master le using a password that isnot allowed access to that master File.