The following questions concern internal controls in the payroll and personnel cycle. Choose the best response.
a. A factory foreman at Steblecki Corporation discharged an hourly worker but did not notify the human resources department. The foreman then forged the worker’s signature on time cards and work tickets and, when giving out the checks, diverted the payroll checks drawn from the discharged worker to his own use. The most effective procedure for preventing this activity is to
(1) require written authorization for all employees added to or removed from the payroll.
(2) have a paymaster who has no other payroll responsibility distribute the payroll checks.
(3) have someone other than persons who prepare or distribute the payroll obtain custody of unclaimed payroll checks.
(4) from time to time, rotate persons distributing the payroll.
b. An auditor found that employee time records in one department are not properly approved by the supervisor. Which of the following could result?
(1) Duplicate paychecks might be issued.
(2) The wrong hourly rate could be used to calculate gross pay.
(3) Employees might be paid for hours they did not work.
(4) Payroll checks might not be distributed to the appropriate employees.
c. The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the
(1) human resource function from the controllership function.
(2) administrative controls from the internal accounting controls.
(3) authorization of transactions from the custody of related assets.
(4) operational responsibility from the record-keeping responsibility.
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