Employee Costs
1.Hire Company Ltd uses a lot of temporary employees.
Which one of the following controls would best ensure that employees are only paid for work they have performed?
A Temporary staff records should be maintained for each member of temporary staff.
B Temporary staff should complete work schedules, authorised by their supervisor.
C Temporary staff pay should be authorised by the human resources manager.
D Temporary staff should be paid by direct transfers to their bank accounts.
Tulips Ltd has a number of staff on maternity leave claiming statutory maternity pay.
2. Which three of the following controls would best ensure that the correct payments are made to
employees?
A The payroll should be checked back to individual employee personnel records
B Payroll totals should be compared to adjusted budgets on a monthly basis
C Total tax deductions should be reconciled with tax returns
D BACS transfer lists should be authorised by the head of personnel
3. For each of the following statements, select whether they are true or false in respect of internal
controls over payroll.
Requiring employees to clock in and out of work helps to ensure that they are paid at the correct
rate.
A True
B False
Reviewing wages paid against wages budgeted helps to ensure that employees are being paid the
correct amounts.
C True
D False
Changes in pay rates should be authorised by senior management.
E True
F False
4. Stamford plc employs a number of trainee staff, at six monthly intervals. All trainees must complete a
probationary period of six months before progressing to the next level of traineeship. The accountant providing assurance on the efficiency of the operation of controls has identified the following deficiencies within Stamford Ltd’s payroll system.
For each deficiency, select the most likely consequence which might arise as a result of that
deficiency.
Employees are not given a personnel file until they have completed their six month probationary
period.
A Employees may be paid the wrong amounts
B The computerised payroll may contain miscalculations
Many employees work overtime but there is no system for authorising the levels of overtime claimed.
Employees may be paid C the wrong amounts
D The computerised payroll may contain miscalculations
5. The following describes the processes in the payroll system at Wembley Ltd.
For each process, select whether it represents a strength or a deficiency of the system.
Employees are given individual security codes to punch into the main door key pad. This key pad
also monitors the hours worked by employees, a sample of which are checked against data from
headcounts during the day.
A Strength
B Deficiency
The payroll is prepared by a payroll clerk from hours worked information on a standard payroll IT
package. The payroll is checked to individual records automatically by the system. The payroll is
approved by the financial controller.
C Strength
D Deficiency
Wages are paid by bank transfer, which is authorised by the financial controller.
E Strength
F Deficiency
6. Workworld Ltd has a computerised payroll system. All employees are paid by BACS directly into their
bank account.
Which two of the following controls will be most effective at ensuring that payment is made to the
correct employee?
A Authorisation of overtime worked
B A sample of calculations performed by the payroll package are manually reperformed each month
C The BACS list is reviewed by the chief accountant together with supporting payroll
documentation
D The print out from the bank is agreed to the BACS list and any discrepancies investigated
7. Which two of the following features in the payroll system of Tyne plc could result in the employee
costs figure in the financial statements being misstated?
A Rates of pay are negotiated at a local level, there is no central control
B The payroll clerk can amend standing data on the payroll system without authorisation of a
senior member of staff
C Personnel records are not kept up to date
D The payroll department receives confirmation of new employees in writing
8. For each of the following statements about internal controls over payroll, select whether they are true or false.
The payroll should be checked back to individual employee personnel records on a regular basis.
A True
B False
Leavers and joiners should be authorised by a senior member of staff.
C True
D False
Reperformance of calculations is unnecessary where the payroll system is computerised.
E True
F False
9. Spoon Ltd is a company that is expanding rapidly and is regularly taking on new employees. The
payroll is processed in-house in the accounts department using a PC. The financial controller is
worried that fictitious employees could be included on the payroll by a dishonest employee from the
accounts department.
Which one of the following internal controls is most likely to prevent fictitious employees from being
added to the payroll?
A Payroll standing data periodically printed out and checked on a line-by-line basis to
independently held employee details
B Use of hierarchical passwords over standing data files
C Pre-authorisation of all amendments to payroll standing data by an independent official
D Supervision of the wages payout by an independent official
10. Which two of the following control procedures will reduce the risk of unauthorised disclosure of
payroll data?
A Exception reporting of high amounts of net pay
B Access controls
C Back-up procedures
D Encryption of data
E Independent review of payroll