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Exam 12: Auditing the Human Resource Management Process

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Question 21

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An auditor vouched data for a sample of employees in a payroll register to approved clock card/time sheet data to provide assurance that

A) Payments to employees are computed at authorized rates.
B) Employees worked the number of hours for which they are paid.
C) Segregation of duties exist between the preparation and distribution of the payroll.
D) Internal controls relating to unclaimed payroll checks are operating effectively.

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Question 22

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Generally, is the inherent risk level for the human resource management process set at low, moderate or high? For what area of the process might the appropriate level differ from the previous answer? Why?

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Inherent risk is normally set low for th...

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Question 23

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An auditor most likely would assess control risk at high if the payroll department supervisor is responsible for

There are few inherent risk factors that directly affect the human resource management process and its related accounts for non-officers.

Which of the following internal control objectives is likely to be a larger concern in the audit of the payroll cycle?

Payroll-related expenses normally are not a material cost to the organization.

Which of the following departments most likely would approve changes in pay rates and deductions from employee salaries?

Comparing amounts selected from the payroll account analysis for payroll accruals to supporting documentation would provide evidence primarily for which assertion?

FASB ASC Topic 715 requires specific disclosures regarding human resources, which of course must be verified and audited by the CPA. What are those disclosures?

Brownstein, CPA, has been engaged to audit the financial statements of Young Computer Outlets, Inc., a new client. Young is a privately owned chain of retail stores that sells a variety of computer software and video products. Young uses an in-house payroll department at its corporate headquarters to compute payroll data and to prepare and distribute payroll checks to its 300 salaried employees. Brownstein is preparing an internal control questionnaire to assist in obtaining an understanding of Young's internal control and in setting control risk. Prepare a "Payroll" segment of Brownstein's internal control questionnaire that would assist in obtaining an understanding of Young's internal control and for setting the control risk. Do not prepare questions relating to cash payroll, IT applications, or payments based on hourly rates, piecework, commissions, employee benefits (pensions, health care, vacations, and so on), or payroll tax accruals other than withholdings. Use the following format:

The Hamster Stop has $93,650 in the Accrued Payroll account. Hamster's weekly payroll is $156,000 and the accrual represents payroll for 3 days. If controls are strong, determine whether additional audit work should be performed on this account.

An auditor most likely would extend substantive tests of payroll when

In an IT payroll system environment, an auditor would be least likely to use test data to test controls related to

In the substantive audit procedures for payroll where the control risk is set at low, an auditor most likely would

Vouching selected items from the payroll register to employee time sheets that have been approved by supervisory personnel provides evidence that

When control risk is assessed as low for assertions related to payroll, substantive tests of payroll balances most likely would be limited to applying substantive analytical procedures and

Give an example of a test of controls that could be used by an auditor to test for the following assertions: Occurrence, Accuracy, and Cutoff.

Tests of details of transactions are often conducted in conjunction with tests of controls.

When an auditor sets control risk low, sufficient evidence can be obtained for most payroll accounts through an understanding of internal controls, substantive analytical procedures, and tests of details of transactions. However, there are several accounts in the payroll cycle that may require more attention. Name the accounts and explain why the additional testing is necessary.

Key segregations of duties in the human resource management process include all of the following except: