Requirement c. For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective. (Use each letter corresponding to a specific misstatement only once.) (Click the icon to view the misstatements likely to be prevented if the controls exist and are effective.) i Misstatements likely to be prevented Internal control Human resource policies require an investigation of an employment application from new employees. Investigation includes checking the employee's background, former employers, and 1. references. A fictitious payroll check that is originated by the person both preparing the payroll A. checks and distributing the payroll checks. A missing time record number never could be identified before preparation of payroll B. starts. 2. Approval of department head or foreman on time records is required before preparing payroll. All prenumbered time records are accounted for before beginning data entry for preparation of 3. payroll. 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 4. mathematical accuracy on a test basis. The payroll accounting software application will not accept data input for an employee number not 5. contained in the employee master file. Persons preparing the payroll do not perform other payroll duties (e.g., human resources or 6. approval of time records) nor do they have access to payroll data master files or cash. Written termination notices, with properly documented reasons for termination, and approval by an 7. appropriate official are required. All checks and notices of electronic payments not distributed to employees are returned to the 8. treasurer for safekeeping and follow-up. Online ability to add employees or change pay rates to the payroll master file is restricted via 9. passwords to authorized human resource personnel. C. A paycheck cannot be processed for an invalid employee number. An unauthorized or invalid time record turned in by an existing employee. The time record may be for an employee who formerly worked for the company or one who is D. temporarily laid off. Both errors and fraud are likely to be prevented if competent, trustworthy employees are hired. Hiring honest employees minimizes a likelihood of fraud. Hiring competent E. employees minimizes the likelihood of unintentional errors. Checks prepared for nonexistent employees or employees on vacation, or absent for F. other reasons, are controlled and safeguarded. Mechanical errors in adding the number of hours, calculating the gross payroll G. incorrectly, or calculating withholding incorrectly. Preparation of a check for a fictitious employee or preparation of checks using an H. unapproved pay rate are prevented. I. The preparation of an inappropriate payroll check for a former employee is prevented