$20-19($Objective $20-2,20-3)$ Items $1$ through $9$ are selected questions typically found in internal control questionnaires used by auditors to obtain an understanding of internal control in the payroll and personnel cycle. In using the questionnaire for a client, a $$yes$$ response to a question indicates a possible internal control, whereas a $$no$$ indicates a potential deficiency.

Is the ability to enter or delete employees in the employee database restricted to the human resources function?

Does an appropriate official authorize initial rates of pay and any subsequent changes in rates?

Are formal records prepared based on information about time worked as entered by employees into an online time system application or point$-$of$-$sale machine?

Is approval by a department head or supervisor required for all time records before they are submitted for payment?

Does an adequate process exist to ensure proper coding of time records to specific jobs or products such as work orders, job numbers, or some similar identification provided to employees?

Is the distribution of payments to employees independent of timekeeping?

Are employees required to show identification to receive paychecks or are they required to use direct deposit?

Are written notices documenting reasons for termination required?

Does a qualified individual independently verify the payroll bank account reconciliation?

Required

For each of the questions, state the transaction$-$related audit objective$($s$)$ being fulfilled if the control is in effect.

For each control, list a test of control to test its effectiveness.

For each of the questions, identify the nature of the potential financial misstatement$($s$)$ if the control is not in effect.

For each of the potential misstatements in part c$.,$ list a substantive audit procedure for determining whether a material misstatement exists.