Fundamental Payroll Certification Fundamental Payroll Audits and Record Retention 3 — Questions and Answers
Question 1: Which federal agency is primarily responsible for enforcing FLSA recordkeeping requirements?
- IRS
- SSA
- Department of Labor Wage and Hour Division (Correct answer)
- EEOC
Correct answer: Department of Labor Wage and Hour Division
The Department of Labor's Wage and Hour Division enforces FLSA provisions, including recordkeeping requirements.
Question 2: A payroll audit reveals that an employee's Form W-4 on file is from 2015 and has not been updated. What action should the employer take?
- Immediately terminate the employee for non-compliance
- Withhold taxes at the single, zero-allowance rate until updated
- Request an updated Form W-4 but continue withholding per the existing form until a new one is submitted (Correct answer)
- File a correction with the IRS immediately
Correct answer: Request an updated Form W-4 but continue withholding per the existing form until a new one is submitted
Employers may continue using an existing W-4 until the employee submits a new one; the old form remains valid.
Question 3: Under ERISA, how long must plan administrators generally retain retirement plan records?
- 3 years
- 6 years (Correct answer)
- 10 years
- Indefinitely
Correct answer: 6 years
ERISA requires that plan records sufficient to determine benefits be retained for at least 6 years after the filing date of documents based on the records.
Question 4: During an internal payroll audit, an auditor tests whether terminated employees were removed from payroll promptly. This control primarily prevents which risk?
- Incorrect overtime calculations
- Overpayment to former employees or ghost employee fraud (Correct answer)
- Failure to issue W-2s on time
- Inaccurate benefits deductions
Correct answer: Overpayment to former employees or ghost employee fraud
Ensuring timely removal of terminated employees prevents unauthorized payments to individuals no longer employed.
Question 5: Which payroll record element is specifically required by the FLSA for non-exempt employees but NOT generally required for exempt employees?
- Employee's full name
- Total wages paid each pay period
- Hours worked each workday and workweek (Correct answer)
- Date of birth if under 19
Correct answer: Hours worked each workday and workweek
FLSA requires precise daily and weekly hours worked to be recorded for non-exempt employees to support overtime calculations.
Question 6: A payroll department implements dual authorization for direct deposit changes. This control is designed to mitigate which audit risk?
- Incorrect tax withholding calculations
- Fraudulent redirection of employee wages (Correct answer)
- Late payroll tax deposits
- Misclassification of workers
Correct answer: Fraudulent redirection of employee wages
Requiring two approvals for bank account changes prevents a single employee from fraudulently redirecting direct deposits.
Question 7: Under the ADA and Title VII, how long must employers with 15 or more employees retain personnel and employment records?
- 6 months
- 1 year (Correct answer)
- 3 years
- 7 years
Correct answer: 1 year
EEOC regulations require covered employers to retain personnel records for at least 1 year from the date of making the record or the personnel action.
Fundamental Payroll Certification Fundamental Payroll Audits and Record Retention 3
Which federal agency is primarily responsible for enforcing FLSA recordkeeping requirements?