Fundamental Payroll Audits and Record Retention Flashcards
7 cards from real Fundamental Payroll Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
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Under the Fair Labor Standards Act (FLSA), how long must payroll records for non-exempt employees be retained?
Answer: 3 years
FLSA requires payroll records, including time cards and wage rate tables, to be kept for at least 3 years.
Which type of payroll audit compares total payroll register amounts to general ledger accounts to identify discrepancies?
Answer: Reconciliation audit
A reconciliation audit matches payroll register totals against the general ledger to ensure financial accuracy.
An employer discovers that I-9 forms for several terminated employees were destroyed after 1 year. Which statement is correct?
Answer: This violates the rule requiring retention for 3 years from hire or 1 year post-termination, whichever is later
I-9 forms must be retained for 3 years from the date of hire or 1 year after termination, whichever is later.
During a payroll audit, an auditor finds that a salaried exempt employee's pay was docked for a partial-day absence. What is the primary concern?
Answer: Potential loss of the employee's FLSA exempt status
Improper deductions from an exempt employee's salary for partial-day absences can jeopardize their FLSA-exempt status.
Which IRS form is used by employees to claim exemption from federal income tax withholding?
Answer: Form W-4
Employees use Form W-4 to inform employers of their withholding allowances, including claiming an exemption from withholding.
A company retains payroll tax records for only 2 years and is then audited by the IRS. What is the likely consequence?
Answer: Penalties for failure to maintain records for the IRS-required 4-year period
IRS regulations require employment tax records to be kept for at least 4 years after the tax becomes due or is paid.
What does a payroll audit 'ghost employee' test specifically look for?
Answer: Fictitious employees added to the payroll to divert funds fraudulently
A ghost employee test identifies fictitious names on the payroll used to divert fraudulent paychecks or direct deposits.
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