Control risk is the risk that a material misstatement in an account will not be prevented or detected on a timely basis by the client’s internal controls. The best controlto prevent or detect fictitious payroll transactions is to(1) use and account for prenumbered payroll checks.(2) obtain authorization from human resources for hiring, pay rate, job status andtermination.(3) verify internally authorized pay rates, computations, and agreement with thepayroll register.(4) conduct periodic independent bank reconciliations of the payroll bank account.
Control risk is the risk that a material misstatement in an account will not be prevented or detected on a timely basis by the client’s internal controls. The best controlto prevent or detect fictitious payroll transactions is to(1) use and account for prenumbered payroll checks.(2) obtain authorization from human resources for hiring, pay rate, job status andtermination.(3) verify internally authorized pay rates, computations, and agreement with thepayroll register.(4) conduct periodic independent bank reconciliations of the payroll bank account.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Control risk is the risk that a material misstatement in an account will not be prevented or detected on a timely basis by the client’s internal controls. The best control
to prevent or detect fictitious payroll transactions is to
(1) use and account for prenumbered payroll checks.
(2) obtain authorization from human resources for hiring, pay rate, job status and
termination.
(3) verify internally authorized pay rates, computations, and agreement with the
payroll register.
(4) conduct periodic independent bank reconciliations of the payroll bank account.
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