The Multiple Choice Questions Blog

Alex Manufacturing 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 desktop PC.

The financial controller, Lucy, 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 this from happening?

Select ONE answer:

1. Payroll standing data is periodically printed out and checked on a line-by-line basis to independently held employee details
2. Pre-authorisation of all amendments to payroll standing data by an independent official
3. Supervision of the wage payout by an independent official
4. Use of hierarchical passwords over standing data files

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Use of hierarchical passwords over standing data files – this will allow the company to restrict access to standing data files to a responsible official, yet still allow other employees to process the wages. This means that an unscrupulous employee cannot access the part of the system where new employees would be added and hence will prevent the fraud. This is therefore the correct answer.

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For the following statement below about the internal controls over payroll, select whether the statement is True, False, No Significant or Material Impact, or No Impact.

• Reperformance of calculations is unnecessary where the payroll system is computerised.

Select ONE answer:

1. True
2. No Significant or Material Impact
3. False
4. No Impact

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – while the risk of errors can be reduced in a computerised payroll system, a sample of calculations should still be checked. This may also bring to light errors with standing data and input.
4. Not correct

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For the following statement below about the internal controls over payroll, select whether the statement is True, False, No Significant or Material Impact, or No Impact.

• Leavers and joiners should be authorised by a senior member of staff.

Select ONE answer:

1. False
2. True
3. No Significant or Material Impact
4. No Impact

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

For the following statement below about the internal controls over payroll, select whether the statement is True, False, No Significant or Material Impact, or No Impact.

• The payroll should be checked back to individual employee personnel records regularly.

Select ONE answer:

1. True
2. False
3. No Significant or Material Impact
4. No Impact

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which ONE of the following features in the payroll system of Alex Manufacturing Ltd could result in the employee costs figure in the financial statements being MISSTATED?

Select ONE answer:

1. Rates of pay are negotiated at a local level; there is no central control
2. Personnel records are kept up to date
3. The payroll department receives confirmation of new employees in writing
4. The payroll clerk CAN amend standing data on the payroll system without the written authorisation of a senior member of staff

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Unauthorised amendments could result in the creation of bogus employees or overpayment of existing employees. Options 1,2 and 3 would not lead to misstatement in the financial statements

This work is licensed under a Creative Commons Attribution 4.0 International License.