Tests of controls payroll and personnel cycle. Ch. 20 2022-12-21

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Tests of controls are an important aspect of auditing, as they help to ensure the reliability and accuracy of financial statements. In the payroll and personnel cycle, tests of controls are used to evaluate the effectiveness of the controls in place to ensure that payroll and personnel transactions are properly recorded, processed, and reported.

There are several types of tests of controls that can be used in the payroll and personnel cycle. One common test is the substantive test of transactions, which involves reviewing a sample of payroll and personnel transactions to determine if they are properly recorded in the accounting records. This may include reviewing time sheets, payroll records, and other documentation to ensure that the transactions are accurately reflected in the financial statements.

Another type of test of controls in the payroll and personnel cycle is the substantive test of balances. This involves reviewing the balances of various accounts related to payroll and personnel transactions, such as employee salaries and benefits, to ensure that they are accurately reflected in the financial statements. This may include reviewing supporting documentation, such as contracts and agreements with employees, to ensure that the balances are correct.

In addition to these substantive tests, auditors may also conduct tests of controls at a higher level, such as evaluating the overall design and effectiveness of the controls in place to ensure the accuracy of payroll and personnel transactions. This may include reviewing policies and procedures, as well as testing the controls through simulation or other means.

Overall, tests of controls in the payroll and personnel cycle are important for ensuring the reliability and accuracy of financial statements. By evaluating the controls in place and performing substantive tests of transactions and balances, auditors can provide assurance that payroll and personnel transactions are properly recorded, processed, and reported.

Ch. 20

tests of controls payroll and personnel cycle

Temporary retention of unclaimed employee paychecks. Substantive Procedures for Payroll and Personnel Transactions 4. All the information in our site are given for nonprofit educational purposes Payroll and Personnel Cycle. A The preparation of the payroll must be under the control of the personnel department. B Balance sheet accounts related to payroll are generally more significant than related transactions. Improper allocation to jobs or processes.


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Test of Controls The main issue of internal controls over payroll and personnel

tests of controls payroll and personnel cycle

Control Risks Assessment of Payroll and Personnel Cycle 2. B Examine employees' names listed on payroll tax returns for agreement with payroll accounting records. Use password protection if these records are stored on line. Which of the following statements about the payroll and personnel cycle is correct? C Distribution of pay checks should be performed by someone who is not involved in the other payroll functions. Change Tracking Log If you are processing payroll in-house with a computerized payroll module, activate the change tracking log and make sure that access to it is only available through a password-protected interface. Documents and Records 1. Match Payroll Register to Supporting Documents The payroll register shows Match Time Cards to Employee List There is a considerable risk that an employee will not turn in a timesheet in a timely manner, and so will not be paid.

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Payroll internal controls — AccountingTools

tests of controls payroll and personnel cycle

No Yes No For which of the following functions is the use of prenumbered documents least important? Restrict Access to Records Lock up employee files and payroll records at all times when they are not in use, to prevent unauthorized access. Use of prenumbered sales invoices in the sales function. Use of prenumbered receiving reports in the acquisitions function. C gross payroll plus the total contributed by the employer for payroll taxes. The overhead charged to inventory at the balance sheet date can be understated if the salaries of administrative personnel are inadvertently or intentionally charged to indirect manufacturing overhead. Examine printouts of transactions rejected by the computer as having invalid employee IDs. The most important control in the timely preparation of these returns is: A computerized preparation of tax returns.

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Payroll and Personnel Cycle

tests of controls payroll and personnel cycle

D The payment of cash to employees should be replaced with payment by checks Which of the following is an accurate statement regarding nonexistent employees? Yes Yes Yes b. Which of the following is not an advantage of such an account? Reconcile the payroll bank account. Sata Wataru advised Peter that the amount of salaries for this year is much higher than last year and there is not much increase in course revenue earned. D gross pay for the current week's payroll Which of the following statements is false? It would be appropriate for the payroll department to be responsible for which of the following functions? Which of the following is the best way for an auditor to determine that every name on a company's payroll is that of a bona fide employee presently on the job? Which of the following statements is correct? B The confidentiality of employee payroll data should be carefully protected to prevent fraud. A fraud awareness B doing tests of balances C doing tests of transactions D understanding the client's internal controls Which of the following errors gives the auditor the least concern in auditing payroll transactions? After a payroll check is cashed and returned to the employee it is referred to as a depository check. There is a weak internal control structure. The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges.


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ch 18 Flashcards

tests of controls payroll and personnel cycle

We have done general operations audit of ABCD 1234 AND company WLL from 1. A weak internal control system allows a department supervisor to "clock in" for a fictitious employee and then approve the employee's time card at the end of the pay period. Internal controls over payroll are effective for almost all companies, even small ones. B Account for a sequence of payroll checks. If an auditor wishes to test the completeness transaction-related audit objective in the payroll and personnel cycle, which of the following would be a reasonable test of control? B the substantive tests of transactions for the payroll cycle are the same for all audit clients.

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Payroll and Personnel Cycle

tests of controls payroll and personnel cycle

Adequate technical training and proficiency. A Payroll transactions are properly disclosed and presented in the notes to the financial statements. These clocks have a number of built-in controls, such as only allowing employees to clock in or out for their designated shifts, not allowing Calculation Verification If you are manually calculating payroll, then have a second person verify all calculations, including hours worked, pay rates used, tax deductions, and withholdings. B performing extensive tests of controls. Small companies usually have effective controls over payroll. Existence Payroll expenses are valid and related accruals are valid liabilities.

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audit ch 20 Flashcards

tests of controls payroll and personnel cycle

The valuation of inventory is affected if the direct labor cost of individual employees is improperly charged to the wrong job or process. Most companies use an imprest account to pay the payroll. A Completeness B Existence C Cut-off D Accuracy. Examination of cash proof sheets and tracing of their totals to the general ledger b. . B a well-defined set of policies that indicate when each form must be filed. Payroll systems should be, whenever possible run electronically.


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Audit program design part ii payroll and personnel cycle... Free Essays

tests of controls payroll and personnel cycle

Overtime Worked Verification Even if you do not require supervisors to approve the hours worked by employees, at least have supervisors approve overtime hours worked. Compare the endorsements on checks with authorized signatures. The most important consideration in evaluating the fairness of the amounts accrued for vacation pay, sick pay, and other benefits is the: a. The careful and timely preparation of all payroll tax returns is necessary to avoid penalties and criminal charges. The total of the individual employee earnings in the payroll master file equals the total: a. Examine procedures manual and observe the recording of transactions. B Payroll transactions are processed by an outside service provider.

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Chapter 20 Flashcards

tests of controls payroll and personnel cycle

C amount expended to date in the current period. Design tests of controls and assess related control risks over the payroll and personnel cycle. They may identify payments being made to employees who no longer work for the company. A check-signing machine should not be used to replace a manual signature. Which of the following is an effective internal accounting control used to prove that production department employees are properly validating payroll time cards at a time-recording station? C independent verification of computer output by a competent individual. D the tests of controls and the substantive tests of transactions for payroll cannot be combined The auditor, in auditing payroll, wants to determine that the individuals included in her sample were employees of the company for the period under review. D Recorded transactions are recorded in the proper accounting period Although significant client business risks affecting payroll are unlikely for most companies, an area that would have the most business risk would be: A payment of hourly employees.

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5 Best Practices for Payroll Internal Controls

tests of controls payroll and personnel cycle

Each of the divisions lacks modern technology that is needed to run a highly efficient corporation. Approval of employee time records. Notice of the termination date of employees no longer working for the company. D identifying employees who have not submitted proper W-2 forms Which of the following is the best way for an auditor to determine that every name on a company's payroll for the Rodgers factory is that of a bona fide employee presently on the job? Examine payroll records for indication of pay rate approval. Yes Yes No d. Such a check might otherwise be stolen and cashed. Each of the above gives the auditor significant concern.

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