CPP CPP Industry Standards 3 — Questions and Answers
Question 1: Under Sarbanes-Oxley (SOX) Section 302, which payroll-related control is most directly affected?
- Worker classification audits
- Internal controls over financial reporting including payroll disbursements (Correct answer)
- Union dues withholding procedures
- State unemployment tax filings
Correct answer: Internal controls over financial reporting including payroll disbursements
SOX Section 302 requires senior executives to certify the accuracy of financial reports, making payroll internal controls a key area of compliance.
Question 2: The APA's Payroll Currently newsletter and publications are primarily used by CPP holders for what purpose?
- Filing payroll tax deposits
- Staying current on legislative and regulatory changes affecting payroll (Correct answer)
- Calculating garnishment limits
- Submitting W-2 corrections
Correct answer: Staying current on legislative and regulatory changes affecting payroll
APA publications like Payroll Currently serve as ongoing professional development resources to keep practitioners updated on payroll law changes.
Question 3: According to payroll industry standards, what is the primary purpose of a payroll audit?
- To terminate non-compliant employees
- To verify payroll accuracy, compliance, and internal controls (Correct answer)
- To calculate year-end bonuses
- To renegotiate vendor contracts
Correct answer: To verify payroll accuracy, compliance, and internal controls
A payroll audit is designed to verify that payroll calculations are accurate, regulations are followed, and internal controls are functioning properly.
Question 4: Which industry standard classifies payroll processing errors into 'pre-processing,' 'processing,' and 'post-processing' categories?
- GAAP error taxonomy
- APA error classification framework (Correct answer)
- IRS penalty tier system
- NACHA return code system
Correct answer: APA error classification framework
The APA's error classification framework organizes payroll errors by the phase in which they occur to support root-cause analysis and prevention.
Question 5: What does the payroll industry term 'gross-to-net' calculation represent?
- Converting annual salary to hourly rate
- The process of subtracting all deductions and taxes from gross wages to arrive at net pay (Correct answer)
- Calculating employer payroll tax obligations only
- Converting foreign currency payroll to USD
Correct answer: The process of subtracting all deductions and taxes from gross wages to arrive at net pay
Gross-to-net is the standard payroll calculation process that subtracts all mandatory and voluntary deductions from gross wages to determine the employee's net take-home pay.
Question 6: Under industry best practices, a payroll department's segregation of duties standard requires that the employee who prepares the payroll should NOT also perform which task?
- Maintain employee timekeeping records
- Approve payroll disbursements (Correct answer)
- Calculate overtime hours
- Generate payroll reports
Correct answer: Approve payroll disbursements
Segregation of duties requires that the person who prepares payroll not also be the one who approves or releases the funds, preventing fraud.
Question 7: The APA's 'Payroll Best Practices' standard recommends that unclaimed or undeliverable paychecks be handled how?
- Returned to the general fund immediately
- Voided and reissued upon employee request only
- Held for a set period then reported and remitted as unclaimed property per state law (Correct answer)
- Donated to an employee relief fund
Correct answer: Held for a set period then reported and remitted as unclaimed property per state law
Best practice requires holding undeliverable checks, then following state unclaimed property (escheatment) laws to report and remit the funds to the state.
CPP CPP Industry Standards 3
Under Sarbanes-Oxley (SOX) Section 302, which payroll-related control is most directly affected?