Practice Test Geeks(CPS) Certified Payroll Specialist Practice Test
← All CPS Flashcard Decks

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

  1. A payroll auditor discovers that an employee's Form W-4 from 2019 was never updated. Is the employer required to withhold based on this old form?

    Answer: Yes — W-4s remain in effect until the employee submits a new one

    A Form W-4 remains valid indefinitely until the employee furnishes a replacement; employers must continue using the most recent valid W-4 on file.

  2. During an audit, which procedure would best verify the completeness of payroll tax deposits for an entire year?

    Answer: Footing all four quarterly Forms 941 and agreeing totals to EFTPS deposit history

    Summing all four quarterly Forms 941 and tracing each deposit obligation to EFTPS records provides full-year coverage of payroll tax deposit completeness.

  3. Which IRS form is used by an employer to request an extension of time to furnish W-2s to employees?

    Answer: Form 8809

    Form 8809 (Application for Extension of Time to File Information Returns) is used to request a 30-day extension to furnish Forms W-2 and other information returns.

  4. An auditor is assessing segregation of duties in payroll. Which combination of functions in one person creates the highest fraud risk?

    Answer: Entering payroll data and reconciling the payroll bank account

    Combining payroll data entry (ability to alter payments) with bank reconciliation (ability to conceal the alteration) in one person eliminates a critical check and creates significant fraud risk.

  5. Under the trust fund recovery penalty, who may the IRS hold personally liable for unpaid payroll taxes?

    Answer: Any responsible person who willfully failed to collect or pay over trust fund taxes

    IRC §6672 imposes the trust fund recovery penalty on any person who is responsible for collecting and paying over trust fund taxes and who willfully fails to do so.

  6. When auditing a company's sick pay, which type of third-party sick pay is subject to FICA withholding?

    Answer: Sick pay paid within six months of the employee's last day of work

    Third-party sick pay is subject to FICA only during the first six months following the employee's last day worked; after six months it is exempt from FICA.

  7. What is the purpose of the year-end payroll reconciliation between Forms W-2, W-3, and the general ledger?

    Answer: To confirm that wages and taxes reported to the IRS, SSA, and employees match the company's internal accounting records

    Year-end reconciliation ensures consistency across external filings (W-2/W-3 submitted to SSA and IRS) and internal records (general ledger), catching errors before they trigger IRS notices.