Which aspect of internal controls for payroll is most directly addressed by the Sarbanes-Oxley Act?

• A. Segregation of duties to prevent fraud and errors
• B. Offering competitive employee benefits
• C. Timely payment of wages to employees
• D. Automating payroll calculations for efficiency

Answer: (A)

Verified step by step guidance

1. Understand the Sarbanes-Oxley Act (SOX): The Sarbanes-Oxley Act was enacted to improve corporate governance and accountability, primarily focusing on preventing fraud and ensuring accurate financial reporting. It emphasizes internal controls and processes to safeguard against errors and fraudulent activities.
2. Identify the key aspect of internal controls for payroll: Internal controls are procedures and mechanisms designed to ensure the accuracy, reliability, and security of payroll processes. One critical aspect is the segregation of duties, which involves dividing responsibilities among different individuals to reduce the risk of fraud or errors.
3. Analyze the options provided: Evaluate each option in the context of SOX. Offering competitive employee benefits and timely payment of wages are important for employee satisfaction but are not directly related to fraud prevention or internal controls. Automating payroll calculations improves efficiency but does not address fraud prevention as directly as segregation of duties.
4. Connect segregation of duties to SOX: Segregation of duties aligns with SOX's emphasis on preventing fraud and ensuring accurate financial reporting. By separating responsibilities (e.g., one person processes payroll while another reviews and approves it), the risk of fraudulent activities or errors is minimized.
5. Conclude that segregation of duties is the correct answer: Based on the principles of SOX and the importance of internal controls, segregation of duties is the aspect most directly addressed by the Sarbanes-Oxley Act in the context of payroll.