CPS Auditing Principles & Procedures 2

Question 1

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?

Accepted Answer

FLSA regular rate of pay rules

Answer

The FLSA requires that overtime be calculated on the employee's regular rate of pay, which must include shift differentials and most other remuneration.

Question 2

A payroll auditor is reviewing a company's garnishment processing. Which document must the employer retain to demonstrate legal authority to withhold wages?

Accepted Answer

Court order or IRS levy notice

Answer

Garnishments must be supported by a court order, IRS levy, or other legally issued withholding notice — not simply internal authorizations.

Question 3

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?

Accepted Answer

$2.13 per hour

Answer

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.

Question 4

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?

Accepted Answer

26

Answer

A biweekly pay frequency results in 26 pay periods per year because employees are paid every two weeks (52 weeks ÷ 2).

Question 5

Which of the following is the primary objective of a payroll compliance audit?

Accepted Answer

Ensuring payroll practices conform to applicable laws and regulations

Answer

A payroll compliance audit's primary goal is to verify that payroll operations adhere to federal, state, and local laws and company policies.

(CPS) Certified Payroll Specialist Practice Test

(CPS) Certified Payroll Specialist Practice Test

CPS Auditing Principles & Procedures 2