14 Each of the following internal controls has been taken from a standard internal control questionnaire used by a CPA firm for assessing control risk in the payroll and personnel cycle. Control Control Activity Objective a) Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee's background, former employers, and references. b) Approval of department head or foreman on time records is required before preparing payroll. c) The payroll accounting software calculates gross and net pay based on hours inputted and information in employee master files, and payroll accounting personnel double-check the mathematical accuracy on a test basis. d) All checks and notices of electronic payments not distributed to employees are returned to the treasurer for safekeeping and follow-up. e) Online ability to add employees or change pay rates to the payroll master file is restricted via passwords to authorized human resource personnel. f) All prenumbered time records are accounted for before beginning data entry for preparation of payroll. g) The payroll accounting software application will not accept data input for an employee number not contained in the employee master file. h) Persons preparing the payroll do not perform other payroll duties (e.g., human resources or approval of time records) nor do they have access to payroll data master files or cash. 1) Written termination notices, with properly documented reasons for termination, and approval by an appropriate official are required. Control activities are the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of an entity's objectives. While there are potentially many such control activities in any entity, control activities generally fall into 5 types (more on this can be found on pps 351 to 354): A B D E Adequate separation of duties Proper authorization of transactions and activities Adequate documents and records Physical control over assets & records Independent checks on performance Required. (a) For each internal control, identify the type(s) of specific control activity to which it applies. (b) For each internal control, identify the transaction-related audit objective(s) to which it applies. (c) In the box following the control, list a specific misstatement (what could go wrong) that could result from the absence of the control. A B D E F Objective Occurrence Completeness Accuracy Posting/Summarization Classification Timing