The following questions concern internal controls in the payroll and personnel cycle. Choose the best response. a.

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The following questions concern internal controls in the payroll and personnel cycle. Choose the best response.

a. A factory supervisor at Steblecki Corporation discharged an hourly worker but did not notify the payroll department. The supervisor then forged the worker's signature on time cards and work tickets and, when giving out the cheques, diverted the payroll cheques drawn from the discharged worker to his own use. The most effective procedure for preventing this activity is to

(1) have a paymaster who has no other payroll responsibility distribute the payroll cheques.

(2) have someone other than persons who prepare or distribute the payroll obtain custody of unclaimed payroll cheques.

(3) require written authorization for all employees added to or removed from the payroll.

(4) from time to time, rotate persons distributing the payroll.

b. A public accountant reviews Shah Ltd.'s payroll procedures. An example of an internal control weakness is to assign to a department supervisor the responsibility for

(1) initiating requests for salary adjustments for subordinate employees.

(2) distributing payroll cheques to subordinate employees.

(3) reviewing and approving time reports for subordinates.

(4) interviewing applicants for subordinate positions prior to hiring by the personnel department.

c. From the standpoint of good internal control, distribut¬ ing payroll cheques to employees is best handled by the

(1) receiving department.

(2) personnel department.

(3) treasurer's department.

(4) employee's departmental supervisor.

(AICPA adapted)

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Auditing And Other Assurance Services

ISBN: 9780130091246

9th Canadian Edition

Authors: Alvin Arens, James Loebbecke, W Lemon, Ingrid Splettstoesser

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