Which of the following is the best way for an auditor to determine that every name on a companys payroll is that of a bona fide employee presently on the job?
16–36.Multiple Choice QuestionsSelect the best answer for each of the following and give reasons for your choice:a.Which of the following is least likely to be considered a substantive procedurerelating to payroll?(1) Investigate fluctuations in salaries, wages, and commissions.(2) Test computations of compensation under profit sharing for bonus plans.(3) Test commission earnings.(4) Test whether employee time reports are approved by supervisors.Correct answer is 4. Testing whether employee time reports are approved bysupervisors is an example of a test of a control, not a substantive procedure.233.Which of the following is the best way for an auditor to determine that everyname on a company’s payroll is that of a bona fide employee presently on the job?a.Examine personnel records for accuracy and completeness.b.Examine employees’ names listed on payroll tax returns for agreement withemployees their badge or identification numbers.c.Make a surprise observation of the company’s regular distribution of paychecks.d.Visit the working areas and confirm with employees their badge or identificationnumbers.
