$20-16($Objective $20-3)$ The following questions concern internal controls in the payroll and personnel cycle. Choose the best response.

An auditor found that employee time records in one department are not properly approved by the supervisor. Which of the following could result?

Duplicate paychecks might be issued.

The wrong hourly rate could be used to calculate gross pay.

Employees might be paid for hours they did not work.

Payroll checks might not be distributed to the appropriate employees.

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

use and account for prenumbered payroll checks.

restrict authorization for hiring, terminating, or changing pay rate or job status to the human resources function.

verify internally authorized pay rates, computations, and agreement with the payroll register.

conduct periodic independent bank reconciliations of the payroll bank account.

A factory supervisor at Steblecki Corporation discharged an hourly worker but did not notify the human resources department. The supervisor then forged the worker$$s signature on time records and job time tickets and, when giving out the checks, diverted the payroll checks drawn from the discharged worker to their own use. The most effective procedure for preventing this activity is to

require written authorization for all employees added to or removed from the payroll.

have an employee who has no other payroll responsibility distribute the payroll checks.

have someone other than persons who prepare or distribute the payroll obtain custody of unclaimed payroll checks.

from time to time, rotate persons distributing the payroll.