Final answer:
The statement is true; detecting payment of fraudulent hours is generally more difficult for auditors than detecting payment to fictitious employees. Fraudulent hours involve smaller discrepancies, while fictitious employees may create detectable anomalies in records.
Step-by-step explanation:
The statement that it is generally more difficult for the auditor to detect payment of fraudulent hours than payment of fictitious employees is true. Detecting payment of fraudulent hours can be more challenging because it usually involves smaller, more nuanced discrepancies that may blend in with legitimate transactions. They can arise from things like misreporting hours worked or inflating hours on timecards. On the other hand, payment to fictitious employees often involves fabricating entire records or identities, which may be more straightforward to identify with thorough employee verification processes and cross-checking records.
Auditors must use a variety of techniques such as data analysis, audit sampling, and controls testing to identify signs of fraudulent hours. These methods can include reviewing timekeeping records, comparing hours paid to hours worked, and looking for anomalies or patterns that suggest manipulation. Payment to fictitious employees can sometimes be uncovered by simply verifying the existence of employees through multiple forms of documentation and checking for any discrepancies in the payroll records.