$20-19($Objectives $20-2,20-3)$ Items $1$ through $8$ 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.

$1.$ Does an appropriate official authorize initial rates of pay and any subsequent changes

in rates?

$2.$ Are formal records such as time cards used for keeping time?

$3.$ Is approval by a department head or foreman required for all time cards before they

are submitted for payment?

$4.$ Does an adequate means exist for identifying jobs or products, such as work orders,

job numbers, or some similar identification provided to employees to ensure proper

coding of time records?

$5.$ Is the issuance of payments to employees independent of timekeeping?

$6.$ Are employees required to show identification to receive paychecks?

$7.$ Are written notices required documenting reasons for termination?

$8.$ Does anyone independently verify the payroll bank account reconciliation?

a $.$ For each of the questions, state the transactionrelated audit objective$($s$)$ being ful

f

illed if the control is in effect.

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

c $.$ For each of the questions, identify the nature of the potential financial misstate

ment$($s$)$ if the control is not in effect.

d $.$ For each of the potential misstatements in part c$.,$ list a substantive audit procedure

for determining whether a material misstatement exists