The scope and objectives of the internal audit function vary widely and depend on the size and structure of the entity and the requirements of its management.
Which ONE of the following functions could the internal audit perform and still operate effectively?
Select ONE answer:
Authorisation of unusual transactions
Development of internal control systems
Examination of financial and operating information
Review of the company’s compliance with website design standards
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
Not correct
Not correct
Correct – Authorising unusual transactions and developing internal control systems are part of the accounting function in an entity. For the internal audit function to operate objectively and independently, it should not be involved in these activities.
The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.
For the following statement below about internal controls over payroll, select whether they are true, false, of no importance and / or of no material importance.
Reconciling this month’s payroll with the previous month’s payroll, without performing any other procedures, ensures that starters and leavers are accounted for correctly.
Select ONE answer:
True
False
Of no importance
Of no material importance
Show your workings to arrive at your answer, and explain and justify your reasons:
For the following statement below about internal controls over payroll, select whether they are true, false, of no importance and/or of no material importance.
Agreeing gross earnings and total tax deducted with taxation returns helps to ensure that employees are being paid the correct amounts.
Select ONE answer:
False
True
Of no importance
Of no material importance
Show your workings to arrive at your answer, and explain and justify your reasons:
At Alex Manufacturing Ltd, potential employees are interviewed by the production manager, Arthur, who then forwards successful candidates’ details, the job title and the rate of pay to the company’s personnel manager, Karen, for an employment offer to be made.
Which ONE of the following controls could be most effective at ensuring that wages are paid accurately?
Select ONE answer:
Payments should be authorised by a director before being submitted for processing
Employees should NOT be interviewed by the production manager, Arthur, and another responsible personnel official, i.e. Karen
Hours paid should be reconciled to timesheets
Reconciliations should be performed between the payroll and the company’s cash records
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
Not correct
Not correct
Correct – The key problem here is a lack of segregation of duties: Arthur, the production manager may be tempted to introduce non-existent employees into the system, leading to the misappropriation of company funds by way of wages payments for non-existent employees. Controls to curb this would therefore seek to verify that the employees being paid do in fact exist and have done work for the company. Authorisation by a director would not help because the director would not know whether the employees were legitimate. Reconciliation of payroll to cash records would not control the amounts included on the payroll in the first place.
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