The Payroll Source CPP Practice Exam 82 Questions with Verified Answers,100% CORRECT

The Payroll Source CPP Practice Exam 82 Questions with Verified Answers Which of the following features is LEAST likely to be considered when looking at the security of a new payroll system? a. regular data back-up and storage b. protection against computer viruses c. limited system access d. system edits - CORRECT ANSWER d. system edits Company deadlines for payroll data input documents are essential for: a. timely processing of the payroll b. accurate entry of data c. guaranteeing that all information is processed d. adequate auditing purposes - CORRECT ANSWER a. timely processing of the payroll The BEST reason for tracking pay-related problem statistics is to enable Payroll to: a. identify root causes and take actions to prevent similar recurrences b. apologize to clients in a more professional manner c. direct problems to those who caused the problem d. justify more resources to handle more problems - CORRECT ANSWER a. identify root causes and take actions to prevent similar recurrences With regard to EEs' reported tips, the ER must: a. withhold and pay only the EEs' portion of FICA taxes on tips b. report tax on tips separately when making an employment tax deposit c. report tips as wages on Form W-2 and pay the ER portion of FICA taxes d. report and pay the ER portion of FICA taxes on the portion of cash tips above the federal minimum wage - CORRECT ANSWER c. report tips as wages on Form W-2 and pay the ER portion of FICA taxes Transactions are recorded in chronological order into books of original entry called: a. registers b. vouchers c. invoices d. journals - CORRECT ANSWER d. journals The KEY advantage of using an automated time and attendance system is that it: a. identifies phantom EEs b. reduces errors c. interfaces with the payroll system d. frees supervisors from having to review hours - CORRECT ANSWER b. reduces errors As part of the implementation of a new payroll system, all transactions from the most recent actual payroll are processed in the new system prior to using the system to run payrolls. This is an example of what type of testing? a. compliance b. back-up c. ongoing d. parallel - CORRECT ANSWER d. parallel To exhibit good customer service skills, payroll staff must understand and be able to explain: a. payroll forms b. benefits enrollment techniques c. systems design decisions d. strategic departmental direction - CORRECT ANSWER a. payroll forms All of the following data elements are required to be maintained in the EE masterfile EXCEPT: a. SSN b. DOB c. marital status d. hourly rate of pay - CORRECT ANSWER c. marital status Upward communication involves: a. dissemination of management decisions to the staff b. interactions between you and your manager c. passing information to management d. conducting quality circle meetings - CORRECT ANSWER c. passing information to management The fact that transactions affect two separate accounts of a business is called: a. compound-entry accounting b. double-entry accounting c. accrual accounting d. T-accounting - CORRECT ANSWER b. double-entry accounting A company pays all executives semimonthly. The FLSA requires all other EEs to be paid on: a. a weekly cycle b. a biweekly cycle c. a semimonthly cycle d. any established cycle - CORRECT ANSWER d. any established cycle Which of the following answers BEST defines the term nonexempt under the FLSA? a. a lower-paid class of EEs b. hourly-paid workers only c. EEs who must be paid OT d. a special class of EEs as determined by the ER - CORRECT ANSWER c. EEs who must be paid OT For how many years must the ER's copy of Form 940 be retained? a. 2 b. 3 c. 4 d. 5 - CORRECT ANSWER c. 4 Copies of the production files and most recent payroll transactions are sent nightly to the parent company in a remote location. This practice is part of what type of plan? a. security b. control c. disaster recovery d. maintenance - CORRECT ANSWER c. disaster recovery EEs who are not eligible for direct deposit and receive paychecks sent through the mail are constructively paid: a. on the check date b. when the checks were postmarked c. when the checks were delivered d. when the checks were cashed - CORRECT ANSWER c. when the checks were delivered Which of the following factors provides system security? a. access level authorizations b. shared passwords c. conducting "physical payouts" d. segregation of duties - CORRECT ANSWER a. access level authorizations Under the FLSA, how long are ERs required to keep records relating to wages, hours, and conditions of employment? a. 3 years b. 4 years or until the file is no longer active c. 7 years d. permanently - CORRECT ANSWER a. 3 years What is the payroll department manager responsible for in a company with strong internal controls? a. assuring segregation of duties in the department b. developing company policy c. initiating payroll transactions d. writing the internal audit transaction test plan - CORRECT ANSWER a. assuring segregation of duties in the department The process of balancing multiple time sheets within a specified pay period utilizes a procedure known as: a. batch totaling b. excepting reporting c. system documentation d. reconciliation - CORRECT ANSWER a. batch totaling On what form must mistakenly paid wages, for which no repayment is made, be reported? a. W-2 b. W-4 c. 1099-R d. 1099-MISC - CORRECT ANSWER a. W-2 Which of the following statements is CORRECT regarding a federal tax levy? a. It does not have to be honored if any other garnishments have been served. b. It requires a new order for each pay period. c. It is limited only by the amount of the EE's net pay. d. It is continued each pay period until a release of levy is received. - CORRECT ANSWER d. It is continued each pay period until a release of levy is received. An ER may exclude a business expense reimbursement from income when the EE's expenses meet which of the following requirements? a. Reimbursements are made with regular payroll. b. Expenses are substantiated and excess advances are returned timely c. Expenses are business-related, substantiated, and excess advances are retained for future travel. d. Expenses are business-related, substantiated, and excess advances are returned timely. - CORRECT ANSWER d. Expenses are business-related, substantiated, and excess advances are returned timely. Under the FLSA, a workweek is defined as: a. any 7 consecutive 24-hour periods b. Sunday through Saturday c. a minimum of a 40-hour/5-day time frame d. stated in a collective bargaining agreement - CORRECT ANSWER a. any 7 consecutive 24-hour periods At least how often must ERs report noncash fringe benefits as income for federal tax withholding purposes? a. each pay period b. monthly c. quarterly d. annually - CORRECT ANSWER d. annually Certain company records must be retained for four years to comply with regulations of which of the following agencies? a. US Citizenship and Immigration Services b. Internal Revenue Service c. Social Security Administration d. Wage and Hour Division, Department of Labor - CORRECT ANSWER b. Internal Revenue Service To build morale and motivate staff, a manager must: a. give good reviews and raises b. reward "stars" and promote competition within each team c. delegate accountability to staff members d. be sincere and specific with praise - CORRECT ANSWER d. be sincere and specific with praise From which of the following taxes are statutory workers' compensation payments exempt? a. FIT only b. FICA only c. FUTA only d. FIT, FICA, and FUTA taxes - CORRECT ANSWER d. FIT, FICA, and FUTA taxes Which of the following items represents an input interface to the payroll system? a. general ledger b. time and attendance c. benefit payments d. material usage records - CORRECT ANSWER b. time and attendance One reason many companies use a Zero Balance Checking Account is that: a. cash is available for investment until items are presented for payment at the company's bank b. funds do not have to be deposited until the EE cashes the check c. the company receives interest on the account d. bank reconciliations are not required - CORRECT ANSWER a. cash is available for investment until items are presented for payment at the company's bank In a customer service situation, Payroll should: a. assure the caller everything is okay, even when it is not b. get in the last word c. avoid addressing stressful issues d. remain assertive and stay focused - CORRECT ANSWER d. remain assertive and stay focused Each of the following items qualifies as a de minimis fringe benefit EXCEPT: a. occasional parties and picnics for EEs b. occasional supper money for working OT c. traditional holiday gifts, such as food items d. group legal services worth less than $100 annually - CORRECT ANSWER d. group legal services worth less than $100 annually All of the following steps are required when initiating direct deposit for an EE EXCEPT: a. prenoting b. receiving financial institution routing number c. getting authorization from the EE d. receiving EE's bank account number - CORRECT ANSWER a. prenoting When paying supplemental wages along with regular wages WITHOUT specifying the amount of each, how would a company determine the amount of income tax to withhold from the supplemental wages if the EE has been paid no supplemental wages so far during the year and the supplemental wage payment is no more than $1,000,000? a. Withhold a flat 25% from the supplemental wages and withhold from regular wages using the appropriate table. b. Withhold a flat 25% from the supplemental wages. c. Withhold income tax as if the total were a single wage payment for a regular payroll period. d. Compute income tax withholding on the regular wages separate from the supplemental wages. - CORRECT ANSWER c. Withhold income tax as if the total were a single wage payment for a regular payroll period. An ER that deposits payroll taxes semiweekly incurs a tax liability of $55,000 on Tuesday and a tax liability of $110,000 on Wednesday. When must the taxes be deposited? a. $55,000 on Thursday and $110,000 on Friday b. $55,000 on Friday and $110,000 on the next Wednesday c. $110,000 on Thursday and $55,000 on Friday d. $165,000 on Thursday - CORRECT ANSWER c. $110,000 on Thursday and $55,000 on Friday Documenting payroll policies and procedures will provide all of the following results EXCEPT: a. a vehicle for improving processes b. a tool for assessing internal business controls c. a mechanism for educating payroll partners, suppliers, and customers d. assurances of payroll personnel competency and performance - CORRECT ANSWER d. assurances of payroll personnel competency and performance Which of the following records MUST be kept for four years? a. hours worked b. time cards c. OSHA records d. voided payroll checks - CORRECT ANSWER d. voided payroll checks Techniques for conducting periodic physical payouts: a. are the same for all EEs b. vary by whether the EE is paid by check or direct deposit c. vary for some EEs such as telecommuters d. vary by wage class and compensation level - CORRECT ANSWER a. are the same for all EEs Which of the following plans describes a cafeteria plan under Section 125 of the Internal Revenue Code? a. a quantified and accountable expense reimbursement plan b. a tax-qualified retirement plan for public educational institutions c. a plan which permits EEs to select from two or more qualified taxable and nontaxable benefits d. a plan whereby state gov't EEs may request that pretax dollars be set aside in a retirement account until age 59 - CORRECT ANSWER c. a plan which permits EEs to select from two or more qualified taxable and nontaxable benefits ERs in non-credit reduction states that pay their state unemployment taxes on time can deduct up to what percentage from the full FUTA tax rate in calculating their FUTA tax payments? a. 0.6% b. 4.5% c. 5.4% d. 6.0% - CORRECT ANSWER c. 5.4% Which of the following items determines the disposition of unclaimed wages? a. state law only b. federal law only c. federal and state law d. no recognized procedures exist - CORRECT ANSWER a. state law only EE deferrals under section 401(k) are subject to which taxes? a. FIT and FICA taxes b. FICA only taxes c. FICA and FUTA taxes d. FIT, FICA, and FUTA taxes - CORRECT ANSWER c. FICA and FUTA taxes What does it mean if, at the end of an accounting period, a company has a debit balance in a liability account? a. The company has underdeposited taxes withheld from EE wages. b. The company has not yet paid the third party. c. The company has withheld too much from the EE. d. The company has paid to a third party more than was withheld from the EE. - CORRECT ANSWER d. The company has paid to a third party more than was withheld from the EE. All of the following factors are advantages of having an in-house developed payroll/HR system EXCEPT: a. scheduling flexibility b. user groups c. security d. control of the system - CORRECT ANSWER b. user groups A payroll department manager should assure: a. an independent mission statement b. appropriate training and equipment resources for staff members c. immediate enactment of EE suggestions d. top payment of staff - CORRECT ANSWER b. appropriate training and equipment resources for staff members Which of the following statements describes a self-insured workers' compensation plan? a. The state pays the workers' compensation payments. b. The ER funds the workers' compensation payments. c. The wages will continue as if the EE is still working. d. The individual EE is responsible for his own insurance. - CORRECT ANSWER b. The ER funds the WC payments. The proper handling of a stop payment includes all of the following steps EXCEPT: a. reversing the direct deposit b. canceling the payment in the payroll system c. notifying the bank account reconciliation EEs d. documenting the reason for the transaction - CORRECT ANSWER a. reversing the direct deposit A request for proposal (RFP) can be used to: a. provide vendors with technical and functional system requirements b. request funds during a budget process c. analyze needs for the system d. assign programming resources to enhance functionality - CORRECT ANSWER a. provide vendors with technical and functional system requirements The Family and Medical Leave Act requires ERs to maintain records for at least: a. 12 weeks b. 1 year c. 2 years d. 3 years - CORRECT ANSWER d. 3 years How may FIT be withheld from separation pay and accrued vacation wages totaling $20,000 that are paid at the time of termination and identified separately on the EE's pay stub, if the EE has been paid $25,000 so far this year and had income tax withheld from her most recent wage payment? a. using the aggregate method only b. using the prior 12 months' tax rate c. at the optional flat rate for all payouts at termination only d. at the optional flat rate or using the aggregate method - CORRECT ANSWER d. at the optional flat rate or using the aggregate method A payroll register for the pay period shows gross earnings of $300,000 and deductions of $120,000. The entry to the payroll expense account would be: a. $120,000 b. $180,000 c. $300,000 d. $420,000 - CORRECT ANSWER c. $300,000 Payroll system user documentation should include: a. a copy of the RFP b. copies of project development documents c. details of disaster recovery procedures d. the history of the payroll system conversaion - CORRECT ANSWER c. details of disaster recovery procedures When checking for phantom EEs, which of the following actions should be taken? a. Notify the EEs of an impending physical payout. b. Have the managers hand checks out to their EEs. c. Have EEs pick up checks and direct deposit/paycard advices and show identification. c. Mail checks directly to EEs' homes. - CORRECT ANSWER c. Have EEs pick up checks and direct deposit/paycard advices and show identification. Which form is used to request an ER identification number (EIN)? a. I-9 b. SS-4 c. SS-5 d. SS-8 - CORRECT ANSWER b. SS-4 One element of a payroll calendar is: a. pay frequency b. hire dates c. total remuneration d. social security numbers - CORRECT ANSWER a. pay frequency With online input, what is the BEST way to control miscellaneous payments? a. verification of a sample of entered data b. a visual audit of the online activity report c. an auditor's comparison of each input source document to the data base record d. a comparison of the online report totals to predetermined totals taken from the source documents - CORRECT ANSWER d. a comparison of the online report totals to predetermined totals taken from the source documents All of the following actions demonstrate a strong customer service orientation EXCEPT: a. exhibiting a customer friendly attitude b. viewing customers as the most important part of the job c. using voice mail to answer phone calls from customers d. establishing relationships with people - CORRECT ANSWER c. using voice mail to answer phone calls from customers ER-sponsored athletic facilities may be nontaxable fringe benefits if the: a. ER requires substantiation of the amount, time, and business purpose of the facilities' use b. ER incurs no substantial additional cost, except labor, to provide the facilities c. facilities are on the ER's premises d. facilities qualify as a de minimis fringe - CORRECT ANSWER c. facilities are on the ER's premises When an ER is advised by the IRS that an EE's Form W-4 is invalid, what action must the ER take? a. All future Forms W-4 must be sent to the IRS as long as the EE is being paid. b. ERs have no obligation to change exemptions unless notified by the EE through a new Form W-4. c. Withhold on the basis of information provided by the IRS. d. The ER should send notice at the end of the quarter, requesting that the EE contact the IRS to clear up the problem. - CORRECT ANSWER c. Withhold on the basis of information provided by the IRS. An EE who works for more than one ER and has exceeded the social security wage base may: a. take a credit against FIT on Form 1040 b. demand that the ER refund the overage c. apply the social security tax to next year's withholdings d. apply the overage to benefits paid at age 65 - CORRECT ANSWER a. take a credit against FIT on Form 1040 When determining the value of ER-provided parking, which of the following valuation methods is allowed? a. ER's cost b. EE's cost c. lower of EE's cost or fair market value d. fair market value - CORRECT ANSWER d. fair market value What is the purpose of the payroll accrual entry? a. to recognize expenses in the period in which they were incurred b. to reverse an entry made in error c. to recognize expenses in the period in which they were paid d. to reverse an entry from a previous period - CORRECT ANSWER a. to recognize expenses in the period in which they were incurred Which of the following steps is LEAST important during the parallel testing phase of a new payroll system? a. the testing of EE earnings and deductions accuracy b. the verification of EEs transferred to the new system from the old system c. the verification of tax withholding calculations for EEs d. testing the functionality of a wage attachment process - CORRECT ANSWER d. testing the functionality of a wage attachment process All of the following practices are acceptable to an external auditor EXCEPT: a. the accounting dept reconciling the payroll checking account b. the payroll supervisor verifying that deposits are made timely c. storage of blank payroll checks in the payroll dept d. the treasury dept being responsible for the signature of payroll checks - CORRECT ANSWER c. storage of blank payroll checks in the payroll dept All of the following types of compensation are subject to social security tax EXCEPT: a. tips under $100 b. deferred bonus c. third-party sick pay up to $3,000 d. workers' compensation benefits - CORRECT ANSWER d. WC benefits Which of the following outcomes is the PRIMARY advantage of developing an in-house system? a. Outsiders are not involved in a firm's daily operations. b. Costs are reduced and can be distributed on an equitable basis. c. The ER controls the entire computer system. d. Time is saved by not having to explain business policies and practices. - CORRECT ANSWER c. The ER controls the entire computer system. An EE covered by group health insurance at the time his employment terminates to return to school is entitled to COBRA continuation rights for: a. 12 months b. 18 months c. 24 months d. 30 months - CORRECT ANSWER b. 18 months How often are Form 940 taxable wages reported? a. annually b. semi-annually c. quarterly d. monthly - CORRECT ANSWER a. annual On a company's financial statements, payroll tax expense appears in the: a. balance sheet b. accrued payroll c. salaries expense d. income statement - CORRECT ANSWER d. Income statement What is the chief advantage of a vendor payroll package? a. reduced processing time b. inexpensiveness and ease of installation c. no required major in-house system development d. lower cost than a service provider contract - CORRECT ANSWER c. no required major in-house system development Which of the following elements is essential to a disaster recovery plan? a. an excess supply of checks and direct deposit stubs b. a compatible off-site remote location to produce payrolls c. detailed documentation of current company policies d. a procedure for limiting security system access - CORRECT ANSWER a. a compatible off-site remote location to produce payrolls Which of the following practices is a strong internal control procedure? a. Have the payroll bank account reconciled in the payroll dept. b. Have the payroll manager distribute paychecks. c. Place payroll checks under the personal control of the payroll manager. d. Have a person other than the person who requested and authorized the payments prepare the payroll checks. - CORRECT ANSWER d. Have a person other than the person who requested and authorized the payments prepare the payroll checks. During 2017, an EE worked for company A and quit after earning $130,000. Later in the same year, the EE was hired by company B. With respect to social security, Medicare, and FUTA, how should company B treat the EE's earnings as of the first wage payment? a. Start accumulating social security, Medicare, and FUTA wages, and withhold both social security and Medicare taxes. b. Start accumulating Medicare wages only, and withhold only Medicare tax. c. Start accumulating social security, Medicare, and FUTA wages, but withhold Medicare tax only. d. Start accumulating Medicare wages only, but withhold both social security and Medicare taxes. - CORRECT ANSWER a. Start accumulating social security, Medicare, and FUTA wages, and withhold both social security and Medicare taxes. Which of the following documents proves an EE's identity and authorization to work? a. social security card b. unexpired US passport c. birth certificate d. Form I-9 - CORRECT ANSWER b. unexpired US passport How are salaries reflected on the income statement? a. income b. assets c. accruals d. expenses - CORRECT ANSWER d. expenses All of the following techniques would enhance the level of customer service EXCEPT: a. adding more customer service personnel b. publishing payroll customer service procedures, calendars, and directories c. utilizing automated call processing tools to take and process caller inquiries d. training company management on pay calculation and tax withholding rules - CORRECT ANSWER d. training company management on pay calculation and tax withholding rules The KEY difference between user guides and payroll policies and procedures is: a. User guides focus on tasks associated with automated tools. b. Payroll policies and procedures set company policies and standards. c. User guides help payroll personnel interpret company policy. d. Payroll policies and procedures permit human resources to design new compensation and benefits programs. - CORRECT ANSWER a. User guides focus on tasks associated with automated tools. A local national is defined as an EE: a. from another country working in the US b. from the US working in a foreign country c. from a foreign company working in the US d. from a foreign country working in his or her home country location - CORRECT ANSWER d. from a foreign country working in his or her home country location What is the effect of failing to record salaries that are earned but not paid at the end of an accounting period? a. understatement of expenses for the period b. overstatement of expenses for the period c. understatement of assets for the period d. overstatement of liabilities for the period - CORRECT ANSWER a. understatement of expenses for the period One employment data element in the masterfile is: a. hourly rate of pay b. marital status c. birthdate d. occupation - CORRECT ANSWER a. hourly rate of pay Which of the following authorities dictates the information provided on a payroll check stub: a. individual states b. Federal Unemployment Tax Act c. Federal Wage and Hour Division d. Social Security Administration - CORRECT ANSWER a. individual states Which of the following forms may be submitted to the IRS in order to receive a written determination of a worker's status as an EE or independent contractor? a. Form W-5 b. Form SS-5 c. Form SS-8 d. Form W-9 - CORRECT ANSWER c. Form SS-8