Auditing Principles & Procedures Flashcards
7 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing Principles & Procedures flashcards as text
During a payroll audit, an auditor discovers that overtime was calculated on base pay only, excluding shift differentials. Which regulation is most likely being violated?
Answer: FLSA regular rate of pay rules
The FLSA requires that overtime be calculated on the employee's regular rate of pay, which must include shift differentials and most other remuneration.
A payroll auditor is reviewing a company's garnishment processing. Which document must the employer retain to demonstrate legal authority to withhold wages?
Answer: Court order or IRS levy notice
Garnishments must be supported by a court order, IRS levy, or other legally issued withholding notice — not simply internal authorizations.
When auditing payroll for a company with tipped employees, what is the minimum direct wage an employer may pay under FLSA's tip credit provision?
Answer: $2.13 per hour
Under the FLSA tip credit, the minimum direct cash wage an employer may pay tipped employees is $2.13 per hour, provided tips bring total pay to at least $7.25.
An auditor finds that a company uses a biweekly pay frequency. How many pay periods per year should the auditor expect when reconciling annual wages?
Answer: 26
A biweekly pay frequency results in 26 pay periods per year because employees are paid every two weeks (52 weeks ÷ 2).
Which of the following is the primary objective of a payroll compliance audit?
Answer: Ensuring payroll practices conform to applicable laws and regulations
A payroll compliance audit's primary goal is to verify that payroll operations adhere to federal, state, and local laws and company policies.
When auditing Form W-2 reporting, an auditor notices that group-term life insurance coverage exceeding $50,000 was not reported. In which box of the W-2 should this amount appear?
Answer: Box 12 with code C, and also included in Boxes 1, 3, and 5
The cost of employer-provided group-term life insurance over $50,000 must be reported in Box 12 with code C and included in taxable wages in Boxes 1, 3, and 5.
An auditor is testing whether independent contractors were correctly classified. Which IRS tool provides formal determination of worker status?
Answer: Form SS-8
IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes) allows either workers or businesses to request an official IRS ruling on worker classification.