Chapter 20
Audit of the Payroll and
Personnel Cycle
Multiple Choice Questions From CPA Examinations
20-16 a. (2) b. (2) c. (3)
20-17 a. (4) b. (4) c. (4)
Multiple Choice Questions From Becker CPA Exam Review
20-18 a. (1) b. (3) c. (3)
20-21
a. b.
RECOMMENDED CONTROL SUBSTANTIVE AUDIT PROCEDURE
1. Approval of time cards by foreman and Observe employees punching in—only
observation of use of time clock by the one card per employee—to see whether
foreman. any employee punches two cards
(normally not an effective or practical
audit procedure).
2. Paychecks distributed by someone Perform payroll payoff, requiring identification
other than the foreman. from all employees prior to payment.
3. Pay employees only for time charged Compare total hours worked from payroll
to jobs. Reconcile payroll expense to journal or listing to total hours worked as
amounts charged to jobs. recorded on job cost tickets.
4. Internal verification of classification. Trace labor distribution to supporting job
input forms.
5. Payroll checks not returned to payroll Perform payoff as described in 2 above.
clerk after signing.
6. Internal verification of calculations and Recompute federal withholding taxes and
amounts. trace to employee earnings record.
7. Payroll checks are prenumbered and Reconcile the disbursements in the payroll
accounted for. Use an imprest bank journal or listing to the disbursements on
account where the amount to be the payroll bank statement.
deposited is taken from the payroll
journal or listing.
20-1
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20-24 A flowchart of steps for each type of test is given below (requirements a.,
b., and c.):
TESTS OF CONTROLS
OR SUBSTANTIVE TESTS TESTS OF DETAILS
OF TRANSACTIONS OF BALANCES
5 9
4 8
2 6
7 3
1
20-2
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