Number 12, for effective internal control the accounts payable department generally
should what?
What should payables do?
They get this, they get this, they get this, they authorize the payment, and they may even
prepare the check, and then give it to the treasurer who signs the check.
A, they should stamp, perforate or otherwise cancel supporting documents after payment
is made.
Who cancels these after payment is made?
The treasurer.
B, ascertain that each requisition is approved as to price, quantity, quality.
The person who does that is in the purchasing department, not the payables department.
C, obliterate the quantity ordered on the receiving department copy.
Who obliterates the quantity before they send it over here?
That would be purchasing, not payables.
D, establish the agreement of the vendor's invoice with receiving report and purchase
order.
Who established the agreement between this and this and this?
That is indeed payables, very nice, very nice, and very nice.
Number 13, an auditor would most likely assess control risk, risk material statement, at
a high level if the payroll department supervisor is responsible for doing what?
Let's see, assessing control risk high.
Here's personnel, as we talked about we said what?
Assessing personnel...
That means control risk is high.
Why, because reliance is low.
We want this to go up, we better do less work.
Basically what they're saying is reliance is low.
Control risk is high because reliance is low.
Why is reliance low?
They're saying one of these is bad, you can't rely.
An auditor will most likely assess control risk at a high level that means if the payroll
department's supervisor is responsible for what?
What should they not do?
Examine the authorization forms for new employees.
What should payroll do, what should they not do?
Should payroll...
Someone gets hired, they then authorize them to be an employee, and shouldn�t they send
documentation to payroll so payroll can set them up in the system?
Should they be able to examine authorization forms for new employees, not prepare them
but examine them?
Sure.
Comparing payroll register with original transmittal data that means batched information that comes
out of the computer, out of the system.
Should they be able to see that to make sure what they process is what the computer spit
out?
Yeah.
Authorizing payroll rate changes for all employees.
Who authorizes payroll rate changes?
That's personnel, not payroll.
Payroll processes the payroll.
Personnel authorizes the rate changes.
Hiring all subordinate payroll department employees.
Normally personnel hires, HR, but could I hire my subordinate?
Can I hire my assistant in my department?
Sure, that's not a problem.
What is a problem, is they should not do this.
They should not hire, fire, determine salary, determine pay rate changes.
They should not do that, personnel should.
What should they not do?
Answer C. Does everyone understand the question?
What they're saying is if you assess control risk high, that means reliance is low, that
means you can't rely because one of these they shouldn't be doing.
Number 14, the purpose of segregating the duties of hiring personnel and distributing
payroll checks is to separate the what?
Hiring personnel, who does that?
Boom.
Distributing payroll checks, boom.
Authorization from custody, personnel, treasurer.
See how I keep it simple.
KISS, Keep It Simple Stupid A, authorization of transactions from custody, yeah.
B, operational responsibility from record keeping, no.
Human resources from controllership, no.
Administrative controls from internal, no.
Best answer A. Number 15, in meeting the control objectives
of safeguarding of assets, which department should be responsible for?
Who's in charge of distributing the checks?
Who's in charge of custody of unclaimed checks?
Remember what we said and the choice is here, treasurer or payroll.
Who has distributing the checks?
Boom, boom, boom, we distribute the checks to treasurer.
Who has the custody of unclaimed checks?
Treasurer.
What do they then do?
They then go back to personnel and say hey, who is Rover Phillip?
I don't know if this person exists.
That would be treasurer, treasurer, answer A.
Number 16, the auditor may observe the distribution of paychecks to ascertain whether what?
Remember, earlier I said someone's there and they're handing out the checks, what does
it tell us?
It tells us that what?
That person actually exists, they're still a current employee, they have a valid, current
employee ID, and they should be getting paid.
If at the end, they don't have an ID and we are still left with checks, we go back to
personnel and say, who are these people?
A, pay rate authorization is properly segregated from operating function, no.
Deductions from gross pay are calculated correctly and properly authorized.
Let's say they're doing your FICA, your Medicare, and those deductions, that's more of a calculation.
But having people stand there and pick-up checks doesn't tell us that.
C, employees of record actually exist and are employed by the client, true.
Paychecks agree with payroll register, again we have to look at the books and records,
not just watching people get their checks.
Best answer is C. Number 17, which of the following departments
most likely would approve changes in pay rates and deductions from employees� salaries.
Who would normally do that?
That would be personnel.
Hires, fires, determines salaries, looks at pay rate changes, boom personnel.
This is authorization, recording, custody, comparison.
Authorization, recording, custody, comparison, all of these should be segregated.
A, personnel, love it.
Treasurer no, controller no, payroll no.
Best answer is what?
A as in Atta boy, apple, it's very nice.