CAF-8 · Chapter 6 · Question 3 of 10
To ensure that wages and salaries are not paid to 'ghost' or fictitious employees, which of the following internal controls is most effective?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Implementing a formal, independent authorization process by HR for adding all new employees to the master payroll file.
Explanation
Formal authorization by an independent HR department ensures that only real, contracted personnel are added to the payroll. Segregation of duties between payroll preparation and payment is also critical to prevent fraud.
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