34.

Comparing selected items from the payroll register to employee time records that have been
approved by supervisory personnel tests which of the following assertions for payroll expense?
A. Occurrence.
B. Completeness.
C. Authorization.
D. Cutoff.

A. Occurrence.

35. An auditor most likely would extend substantive tests of payroll when
A. Payroll is extensively audited by the state government.
B. Payroll expense is substantially higher than in the prior year due to company growth.
C. Over-payments are discovered in performing tests of details.
D. Employees complain to management about too much overtime.

C. Overpayments are discovered in performing tests of details.

36. Which of the following could test the occurrence assertion for payroll-related liabilities?
A. Compare items in accrued payroll taxes to the supporting payroll tax return.
B. Search for unrecorded liabilities.
C. Examine payroll tax returns to determine that the expense was recorded in the proper period.
D. Review payroll liabilities for proper classification as short-or long-term.

A. Compare items in accrued payroll taxes to the supporting payroll tax return.

37. Which of the following is required of an auditor who is testing the fair value of options in share-
based compensation?
A. Using a specialist.
B. Testing the inputs used in the valuation model.
C. Becoming an expert in option-pricing.
D. Using the work of internal auditors.

B. Testing the inputs used in the valuation model.

38. In an IT payroll system environment, an auditor would be least likely to use test data to test controls
related to
A. Missing employee numbers.
B. Proper approval of overtime by supervisors.
C. Time cards with invalid job numbers.
D. Agreement of hours per clock cards with hours on time cards.

D. Agreement of hours per clock cards with hours on time cards.

39. Effective internal control over unclaimed payroll checks that are kept by the Treasury Department
would include Accounting Department procedures that require
A. Effective cancellation and stop payment orders for checks representing unclaimed wages.
B. Redepositing unclaimed wages after a period of 3 months.
C. Accounting for all unclaimed wages in a current liability account.
D. Periodic accounting for the actual checks representing unclaimed wages.
D. Periodic accounting for the actual checks representing unclaimed wages.

40. Effective internal control over the payroll function would include which of the following?
A. Total time recorded on time-clock punch cards should be reconciled to job reports by employees
responsible for those specific jobs.
B. Payroll Department employees should be supervised by the management of the Human Resource
Department.
C. Payroll Department employees should be responsible for maintaining employee personnel records.
D. Total time spent on jobs should be compared with total time indicated on time clock punch cards.

D. Total time spent on jobs should be compared with total time indicated on timeclock punch cards.