LO1 Describe the major business activities and related information processing

operations performed in the human resources management (HRM)/payroll cycle.

LO1.1. Which activity below is not performed by Human Resources management
(HRM)?
A) compensation B) training
C) discharge D) recruitment and hiring

LO1.2. Which department should have the sole ability to provide information to the
AIS about hiring, terminations, and pay rate changes?
A) payroll B) timekeeping
C) production D) HRM

LO1.3. Experts estimate that, on average, the costs associated with replacing an
employee are about ________ the employee's annual salary.
A) one-quarter of B) one-half of
C) one and one-half times D) twice

LO1.4. For recording time spent on specific work projects, manufacturing companies
usually use a
A) job time ticket. B) time card.
C) time clock. D) labor time card.
LO1.5. ________ are used to transmit time and attendance data directly to the payroll
processing system.
A) Badge readers B) Electronic time clocks
C) Magnetic cards D) none of the above

LO1.6. Which of the following is not classified as a voluntary deduction?

A) pension plan contributions B) social security withholdings
C) insurance premiums D) deductions for a charity organization

LO1.7. Which type of payroll report contains information such as the employees'
gross pay, payroll deductions, and net pay in a multicolumn format?
A) payroll register B) deduction register
C) employee earnings statement D) federal W-4 form

LO1.8. Which organization provides payroll processing as well as other HRM

services, like employee benefit design and administration?
A) title companies B) payroll service bureau
C) professional employer organization D) paycheck distribution companies
LO1.9. The payroll transaction file should contain
A) entries to add new hires. B) time card data.
C) changes in tax rates. D) All of the above are correct.

LO1.10. The employer pays a portion of some payroll taxes and employee benefits.
Both the employee and employer pay which benefit or tax listed below?
A) social security taxes B) federal income taxes
C) state income taxes D) none of the above

LO1.11. Which of the following statements is false regarding the use of incentives,
commissions and bonuses in the payroll system?
A) Using incentives, commissions, and bonuses requires linking the payroll system
and the information systems of sales and other cycles in order to collect the data used
to calculate bonuses.
B) Bonus/incentive schemes must be properly designed with realistic, attainable goals
that can be objectively measured.
C) Incentive schemes can result in undesirable behavior.
D) All of the above are true.
LO2 Explain the key decisions to be made in the HRM/payroll cycle, and identify
the information required to make those decisions.
LO3 Identify the major threats in the HRM/payroll cycle, and evaluate the
adequacy of various internal control procedures for dealing with them.
LO3.1. Why is a separate payroll account used to clear payroll checks?
A) for internal control purposes, to help limit any exposure to loss by the company
B) to make bank reconciliation easier
C) Banks don't like to commingle payroll and expense checks.
D) All of the above are correct.

LO3.2. The following control can reduce the distribution of fraudulent paychecks.
A) Have internal audit investigate unclaimed paychecks.
B) Allow department managers to investigate unclaimed paychecks.
C) Immediately mark "void" across all unclaimed paychecks.
D) Match up all paychecks with time cards.

LO3.3. The most vital control in preventing unauthorized changes to the payroll
master file is
A) hiring totally honest people to access and make changes to this file.
B) segregation of duties between the preparation of paychecks and their distribution.
C) segregation of duties between the authorization of changes and the physical
handling of paychecks.
D) having the controller closely review and then approve any changes to the master
file.
LO3.4. Which of the following is not a potential effect of inaccurate data on employee
time cards?
A) increased labor expenses
B) erroneous labor expense reports
C) damaged employee morale
D) inaccurate calculation of overhead costs

LO3.5. All of the following are controls that should be implemented in a payroll
process, except
A) supervisors distribute paychecks since they should know all employees in their
department.
B) someone independent of the payroll process should reconcile the payroll bank
account.
C) sequential numbering of paychecks and accounting for the numbers.
D) restrict access to blank payroll checks and documents.