Control Enviroment
1 Are all employees paid by check or direct deposit?
2 Is a special payroll bank account used?
3: Are payroll checks signed by persons who do not prepare check or keep cash funds or accounting records?
4 lfa check-signing machine is used, are the signature plates controlled?
5.,' Is the payrnll l:lank accountreconcHed by someone who does not prepare, sign; or deliver paychecks?
6. Are payroll department personnel rotated in their duties? Required to take vacations Bonded?
7. Is there a timekeeping department (function) independent of the payroll department?
8. Are authorizations for deductions signed by the employees on file?
Occurence
9. Are time cards or piecework reports prepared by the employee approved by her or his supervisor?
10. Is a time clock or other electromechanical or computerized system used?
11. Is the payroll register sheet signed by the employee preparing it and approved prior to payment?
12. Are names of terminated employees reported in writing to the payroll department?
13. Is the payroll periodically compared to personnel files?
14. Are checks distributed by someone other than the employee's immediate supervisor?
15. Are unclaimed wages deposited in a special bank account or otherwise controlled by a responsible officer?
16. Do internal auditors conduct occasional surprise distributions of paychecks?
Completeness
17. Are names of newly hired employees reported in writing to the payroll department?
18. Are blank payroll checks prenumbered and the numerical sequence checked for missing documents?
Accuracy
19. Are all wage rates determined by contract or approved by a personnel officer?
20. Are timekeeping and cost accounting records (such as hours, dollars) reconciled with payroll department calculations of hours and wages?
21. Are payrolls audited periodically by internal auditors?
22. Are individual payroll records reconciled with quarterly tax reports?
Classification
23. Do payroll accounting personnel have instructions for classifying payroll debit entries?
Cutoff
24. Are monthly, quarterly, and annual wage accruals reviewed by an accounting officer?
Required:
Refer to the internal control questionnaire on a payroll system (above)
a. Assume that the answer to each question is no. Choose one question from each section matching the questions to possible errors or frauds that could occur because of the absence of the control.
b. Of the six controls you chose above, which controls are preventive controls and which are detective? Explain how and why.