CPM Payroll Audit & SOX Controls 3

Question 1

When performing a payroll compliance audit, an auditor reviews I-9 documentation and finds several forms with Section 1 completed after the employee's first day of work. What is the correct I-9 completion deadline for employees?

Accepted Answer

No later than three business days after the first day of employment

Answer

Employees must complete Section 1 of Form I-9 no later than the end of their first day of work, but employers have three business days to complete Section 2.

Question 2

A material weakness in payroll internal controls under SOX is best defined as:

Accepted Answer

A deficiency, or combination of deficiencies, where there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis

Answer

A material weakness is the most severe classification of internal control deficiency, indicating a reasonable possibility that material misstatement will not be caught in time.

Question 3

Which type of payroll audit test directly verifies that recorded payroll transactions actually occurred and involved real employees?

Accepted Answer

Existence/occurrence test

Answer

The existence/occurrence assertion tests whether recorded transactions actually happened, which in payroll means confirming that paid employees are real and worked as recorded.

Question 4

An external auditor performing a SOX-related payroll audit sends a letter directly to employees asking them to confirm their year-to-date earnings. This procedure is called:

Accepted Answer

Positive confirmation

Answer

A positive confirmation requires the recipient to respond regardless of whether they agree or disagree with the information, making it a strong form of third-party evidence.

Question 5

Under SOX, what is the primary responsibility of the external auditor with respect to management's Section 404 assessment for accelerated filers?

Accepted Answer

Attest to and report on the effectiveness of internal control over financial reporting

Answer

For accelerated filers, the external auditor must independently attest to and report on the effectiveness of the company's ICFR, not just review management's assessment.

(CPM) Certified Payroll Manager Practice Test

(CPM) Certified Payroll Manager Practice Test

CPM Payroll Audit & SOX Controls 3