chapter 15 - human resource cycle

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? A fictitious employee payroll record was added to the payroll master file.

Separation of duties - employees who have access to master file should not be able to access payroll

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? A computer operator used an online terminal to increase her own salary.

Separation of duties - operator should not have access to data entry

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? A programmer obtained the payroll master file and increased his salary.

Separation of duties - programmer should not be entering in master files

The data entry program (HR) should include what (3) edit checks?

(1) field checks (2) limit checks (3) validity check

Which represents the best control to address the following payroll department system control weakness? : The production manager at Ghost Manufacturing Company told the payroll department he had hired a new employee. On payday, the paymaster could not find the employee and upon investigation, found that the employee did not exist. (a) Separation of payroll and personnel departments (b) All payroll checks are sequentially prenumbered and periodically accounted for. (c) Independent paymaster to distribute paychecks (d) The cashier signs all payroll checks only when supported by proper documentation (e) Imprest payroll bank account (f) Timekeeping department reconciles time cards to job time summaries

(a) Separation of payroll and personnel departments

Which represents the best control to address the following payroll department system control weakness? : Southern Star Manufacturing Company's payroll department routinely distributed paychecks on payday. The payroll supervisor suddenly quit her job. On the next payday, the payroll department could not find employees to claim two paychecks. (a) Separation of payroll and personnel departments (b) All payroll checks are sequentially prenumbered and periodically accounted for. (c) Independent paymaster to distribute paychecks (d) The cashier signs all payroll checks only when supported by proper documentation (e) Imprest payroll bank account (f) Timekeeping department reconciles time cards to job time summaries

(c) Independent paymaster to distribute paychecks

Which represents the best control to address the following payroll department system control weakness? : The internal auditor of Eastern Overboard Company prepares the bank reconciliation. He has difficulty managing the large number of outstanding checks at month-end in the bank reconciliation. Most of the outstanding checks are employee paychecks. (a) Separation of payroll and personnel departments (b) All payroll checks are sequentially prenumbered and periodically accounted for. (c) Independent paymaster to distribute paychecks (d) The cashier signs all payroll checks only when supported by proper documentation (e) Imprest payroll bank account (f) Timekeeping department reconciles time cards to job time summaries

(e) Imprest payroll bank account

Which represents the best control to address the following payroll department system control weakness? : Half Moon Manufacturing Company's production manager is unsure that the second shift employees are working all hours reported on the job time tickets. (a) Separation of payroll and personnel departments (b) All payroll checks are sequentially prenumbered and periodically accounted for. (c) Independent paymaster to distribute paychecks (d) The cashier signs all payroll checks only when supported by proper documentation (e) Imprest payroll bank account (f) Timekeeping department reconciles time cards to job time summaries

(f) Timekeeping department reconciles time cards to job time summaries

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? A factory employee punched a friend's time card in at 1:00 P.M. and out at 5:00 P.M. while the friend played golf that afternoon.

Biometric identifier so you can't forge a time file

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? A factory supervisor failed to notify the HRM department that an employee had been fired. Consequently, paychecks continued to be issued for that employee. The supervisor pocketed and cashed those paychecks.

Exit interview when someone leaves a company to do ensure things like taking them off the payroll, email, returning their keys, etc. gets done

TRUE or FALSE - The document within the payroll system that that notifies the payroll department when an employee has been promoted to a position having a higher salary is the PAY VOUCHER

FALSE - PERSONNEL ACTION FORM

TRUE or FALSE - Preparing the payroll and filing payroll tax forms should be separated.

FALSE - PR should complete all of it

TRUE or FALSE - Form 1099 is sent to each employee for use in preparing individual tax returns.

FALSE - employees don't get 1099s, they get W2s; contractors get 1099s

TRUE or FALSE - An example of control weakness is to assign to a department supervisor the responsibility for initiating requests for salary increases for his or her employees.

FALSE - not a weakness; supervisor should do this.

TRUE or FALSE - An objective of the HUMAN RESOURCE department is to ensure that all employee services are recorded accurately and in a timely manner

FALSE - payroll (recording function)

TRUE or FALSE - An effective control procedure to discourage supervisors from submitting time cards and accepting (and cashing) paychecks for fictitious or former employees would be to require all terminated employees to have exit interviews with their SUPERVISORS

FALSE - should be with HR

TRUE or FALSE - An example of control weakness is to assign to a department supervisor the responsibility for reviewing and approving time cards

FALSE - time should be approved by the supervisor

TRUE or FALSE - When a person quits or is terminated from a company, the person's record in the payroll system should be deleted IMMEDIATELY to prevent bogus paychecks from being issued

FALSE - you need to finish the fiscal year (not immediately)

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? During data entry, the hours worked on an employee's time card for one day were accidentally entered as 80 hours, instead of 8 hours

Limit check - can't work 80 hours in a day

K Company has just begun operations and has the following payroll procedures. You are asked to point out weaknesses and suggest improvements in their system: Write a response for the following situation: A supply of blank time cards is kept in a box near the entrance to the factory. All workers take home a time card on Monday morning and fill in their names. During the week they record the time they arrive and leave work by punching their time cards in the time clock located near the main entrance to the building. At the end of the week the workers drop the time cards in a box near the exit. A payroll clerk retrieves the completed time cards from the box on Monday morning. Employees are automatically removed from the payroll master file when they fail to turn in a time card.

Need a place where these time cards are punched—employees should never take time cards home with them; these should now be electronic. To make it better, use biometric identifiers (if company can afford). Separation of duties.

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? Some time cards were lost during payroll preparation; consequently, when paychecks were distributed, several employees complained about not being paid.

Record count - making sure all employees are accounted for

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? The organization was fined $5000 for making a late quarterly payroll tax payment to the IRS.

System regarding due dates of all tax returns to ensure you do not get behind

TRUE or FALSE - In order to protect against the distribution of fraudulent paychecks, a good procedure is to immediately mark "void" across all unclaimed paychecks

TRUE

TRUE or FALSE - It is important to separate the preparation of the payroll from those who authorize personnel actions

TRUE

TRUE or FALSE - It is important to separate the preparation of the payroll from those who sign paychecks

TRUE

TRUE or FALSE - The personnel action request notifies the payroll department when an employee has been promoted to a position having a higher salary.

TRUE

TRUE or FALSE - It would be sound internal control for the the payroll department to prepare governmental reports concerning withholdings from employees' paychecks

TRUE - PR department does withholdings

TRUE or FALSE - An example of control weakness is to assign to a department supervisor the responsibility for distributing payroll checks to his or her employees.

TRUE - supervisor should NEVER distribute paychecks

TRUE or FALSE - Signing and distributing paychecks should be separated

TRUE - yes, ideally

Which one of the following represents a weakness in internal control regarding the human resources area? a. The payroll staff distributes paychecks to employees in other departments. b. The payroll department supervisor makes decisions regarding the hiring of payroll department employees. c. The supervisors of all departments are responsible for initiating requests for salary increases for their subordinate employees. d. Supervisors are responsible for reviewing and approving time reports of their subordinate employees

a. The payroll staff distributes paychecks to employees in other departments. **Payroll is a recording function—when you distribute the paychecks that is a custody function—2 functions should be separate.

The employer pays a portion of some payroll taxes and employee benefits. Both the employee and employer pay which benefit or tax listed below? a. social security taxes b. federal income taxes c. state income taxes d. none of the above

a. social security taxes

The department responsible for collecting and maintaining time cards and reconciling these to job time summary tickets is the a. timekeeping department. b. payroll department. c. personnel department. d. production department (for factory workers).

a. timekeeping department. **Track the time and assign it to particular jobs

K Company has just begun operations and has the following payroll procedures. You are asked to point out weaknesses and suggest improvements in their system: Write a response for the following situation: The factory supervisor interviews and hires all job applicants. The new employee prepares a W-4 form and gives it to the supervisor. The supervisor writes the hourly rate of pay for the new employee in the corner of the W-4 form and then gives the form to the payroll clerk as notice that a new worker has been hired. The supervisor verbally advises the payroll department of any subsequent pay raises.

all of these actions need to be completed in the computer, not on paper. HR needs to process information electronically

how often is the form 940 filed??

annually

Which of the following organizational units is not typically involved in the management of employee services? a. Personnel department b. Credit department c. Payroll department d. Cash disbursement department e. Timekeeping department

b. Credit department

The department responsible for the actual computation and preparation of payroll is the a. accounts payable department. b. payroll department. c. personnel department. d. production department (for factory workers).

b. payroll department.

The department responsible for authorizing employee pay deductions is the: a. payroll department b. personnel department c. independent paymaster d. production department (for factory workers)

b. personnel department (same as HR department)

Various payroll forms and reports must be submitted to federal and state entities by certain deadlines. The federal form which is not due on or before January 31 of each year is the a. Form W-2. b. Form W-3. c. Form 941. d. Form 1099-MISC

c. Form 941 -- **Due quarterly -- The other 3 are due 1x a year in January

Which of the following is not a report based on payroll processing? a. Payroll register b. Earnings register c. Personnel strength report d. F.I.C.A. withholding report e. Federal income taxes report

c. Personnel strength report **All documents would be involved in the payroll process EXCEPT the personnel strength report.

Form 941 is filed to report federal income and social security taxes withheld from employees. It is filed: a. weekly b. monthly c. quarterly d. annually

c. quarterly

K Company has just begun operations and has the following payroll procedures. You are asked to point out weaknesses and suggest improvements in their system: Write a response for the following situation: The payroll checks are manually signed by the chief accountant and then given to the factory supervisor, who distributes them to the employees. The factory supervisor arranges for delivery of the paychecks to any employee who is absent on payday.

chief accountant should never sign payroll checks over accounting (recording function); treasurer (finance department) should always sign payroll checks. Supervisor should never distribute PR checks b/c they authorize things. Time keeping department or paymaster should distribute. You don't deliver checks to an absent employee—try to persuade staff to go to direct deposit.

The federal tax which requires that employees and employers contribute equally for old age, survivors', disability, and hospital insurance benefits is: a. federal unemployment tax b. federal income tax c. workers' compensation d. social security tax

d. social security tax

why should the data entry program (HR) include a FIELD CHECK in their edit checks?

for numeric data in the employee-number and hours worked fields

What internal control procedure(s) would be most effective in preventing the following errors or fraudulent acts? An inadvertent data entry error caused an employee's wage rate to be overstated in the payroll master file

independent verification

K Company has just begun operations and has the following payroll procedures. You are asked to point out weaknesses and suggest improvements in their system: Write a response for the following situation: The payroll bank account is reconciled by the chief accountant, who also prepares the various quarterly and annual tax report

its ok for this person to do the reports—but you need someone else reconciling bank accounts (separation of duties necessary for bank account reconciliations)

why should the data entry program (HR) include a LIMIT CHECK in their edit checks?

on the hours worked field (reasonableness)

why should the data entry program (HR) include a VALIDITY CHECK in their edit checks?

to check employee number