EXHIBIT 5.15 Internal Control Questionnaire Payroll Processing Yes/No Comments Control Environment Are all employees paid by check or direct deposit? Is a special payroll bank account used? Are payroll checks signed by persons who do not prepare checks or keep cash funds or accounting records? If a check-signing machine is used, are the signature plates controlled? Is the payroll bank account reconciled by someone who does not prepare, sign, or deliver paychecks? Are payroll department personnel rotated in their duties? Required to take vacations? Bonded? Is there a timekeeping department (function) independent of the payroll department? Are authorizations for deductions signed by the employees on file? Occurrence Are time cards or piecework reports prepared by the employee approved by her or his supervisor? Is a time clock or other electromechanical or computerized system used? Is the payroll register sheet signed by the employee preparing it and approved prior to payment? Are names of terminated employees reported in writing to the payroll department? Is the payroll periodically compared to personnel files? Are checks distributed by someone other than the employee's immediate supervisor? Are unclaimed wages deposited in a special bank account or otherwise controlled by a responsible officer? Do internal auditors conduct occasional surprise distributions of paychecks? Completeness Are names of newly hired employees reported in writing to the payroll department? Are blank payroll checks prenumbered and the numerical sequence checked for missing documents? Accuracy Are all wage rates determined by contract or approved by a personnel officer? Are timekeeping and cost accounting records (such as hours, dollars) reconciled with payroll department calculations of hours and wages? Are payrolls audited periodically by internal auditors? Are individual payroll records reconciled with quarterly tax reports? Classification Do payroll accounting personnel have instructions for classifying payroll debit entries? Cutoff Are monthly, quarterly, and annual wage accruals reviewed by an accounting officer? Internal Control Questionnaire Items: Assertions, Tests of Controls, and Possible Errors or Frauds.Following is a selection of items from the payroll processing internal control questionnaire in Exhibit 5.15. * Are names of terminated employees reported in writing to the payroll department? * Are authorizations for deductions signed by the employee on file? * Is there a timekeeping department (function) independent of the payroll department? * Are timekeeping and cost accounting records (such as hours, dollars) reconciled with payroll department calculations of hours and wages? Required: For each of the four preceding questions: * Identify the assertion to which the question applies. * Specify one test of controls an auditor could use to determine whether the control was operating effectively. * Provide an example of an error or fraud that could occur if the control were absent or ineffective. * Identify a substantive auditing procedure that could detect errors or frauds that could result from the absence or ineffectiveness of the control items