Payroll expenses take major part of the company’s earnings and hence these are one the major expenses for an organization. There are chances of misstatements in payroll accounting due to high human involvement. The auditor plans separately for the audit of payroll transactions. To choose: The procedure that is most likely to be considered a weakness in internal control over payroll.

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Chapter 12, Problem 12.15MCQ

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Payroll expenses take major part of the company’s earnings and hence these are one the major expenses for an organization. There are chances of misstatements in payroll accounting due to high human involvement. The auditor plans separately for the audit of payroll transactions.

To choose: The procedure that is most likely to be considered a weakness in internal control over payroll.

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Which of the following activities most likely would be considered a weakness in an entity’s internal control over payroll?a. A voucher for the amount of the payroll is prepared in the general accounting department based on the payroll department’s payroll summary. b. Payroll checks are prepared by the accounts payable department and signed by the treasurer. c. The employee who distributes payroll check returns unclaimed payroll checks to the payroll department. d. The personnel department sends employees’ termination notices to the payroll department.

What is NOT an example of internal control procedures that help prevent payroll fraud? a.Outsource Payroll Administration b.Require mandatory vacations c.Make sure only one person handles payroll functions d.Conduct periodic unannounced audits

For the purpose of internal control, the same person who prepares payroll checks should also distribute them. True or False True False