Question

Which of the following statements is false?

1) The payroll cycle consists of one class of transactions.
2) Balance sheet accounts related to payroll are generally more significant than related transactions.
3) Internal controls over payroll are effective for most companies.
4) Small companies usually have effective controls over payroll.

Answer 1

Statement 3) Internal controls over payroll are effective for most companies is false.

Step-by-step explanation:

Statement 3) Internal controls over payroll are effective for most companies is false.

Internal controls over payroll are important to ensure accuracy, prevent fraud, and maintain compliance with labor laws. However, not all companies have effective controls in place. Some smaller companies, in particular, may lack the resources or expertise to establish strong internal controls over their payroll processes.

For example, a small company may not have separate personnel to handle each step of the payroll cycle, which increases the risk of errors and fraud. Additionally, smaller companies may not allocate enough resources to regularly review and test their payroll controls.