Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following is NOT a component of key controls over payroll?

1. Calculation of wages and salaries

2. Payment of wages and salaries

3. Authorization of bank transactions

4. Authorization of deductions

The correct answer is: Authorization of bank transactions

In the context of payroll key controls, the vital components typically focus on managing the accuracy and legitimacy of payroll processes. Key controls over payroll are designed to ensure that employees are paid correctly and on time, while also safeguarding the company from fraudulent activities. The calculation of wages and salaries, payment of wages and salaries, and authorization of deductions are all essential aspects of payroll controls. These components are integral to ensuring that the payroll process is accurate and compliant with regulatory and organizational standards. Calculation ensures that employees receive the correct amount based on worked hours and applicable rates, payment involves the actual transfer of funds to employees, and authorization of deductions pertains to validating any withholdings for taxes, benefits, or garnishments. On the other hand, while the authorization of bank transactions is an important control in the overall financial processes of an organization, it is not specifically a core component of payroll key controls. Payroll key controls primarily monitor the flow and accuracy of employee compensation rather than the broader banking operations, which cover many other transactions outside of payroll. Hence, it does not directly pertain to the payroll function itself.