University:
California State University, Northridge
Course:
ACCT 460 | Auditing Principles and Analytics
Academic year:

2024
Views:

469

Pages:

21
Author:

snowbaby1950sp2

Audit of the Payroll and Personnel Cycle Chapter 20 Part 1 Learning Objective 1 Identify the accounts and transactions in the payroll and personnel cycle. Accounts in the Payroll and Personnel Cycle The overall objective in the audit of the payroll and personnel cycle is to evaluate whether the account balances affected by the cycle are fairly stated in accordance with generally accepted accounting principles. Accounts in the Payroll and Personnel Cycle Cash in Bank Payment for salaries Payment for payroll taxes Accrued Wages, Salaries, Bonuses, and Commissions Payment Beginning balance Earned wages, salaries, etc. Ending balance Withheld Income Taxes and Other Deductions Payment Beginning balance Payroll withholding Ending balance Direct Labor Accounts in the Payroll and Personnel Cycle Cash in Bank Payment for salaries Payment for payroll taxes Payroll Tax Expense Withheld Income Taxes and Other Deductions Payment Beginning balance Payroll withholding Ending balance Accrued Payroll Tax Expense Payment Beginning balance Payroll tax expense Ending balance Accounts in the Payroll and Personnel Cycle In most systems the accrued wages and salaries account is used only at the end of an accounting period. Learning Objective 2 Describe the business functions and the related documents and records in the payroll and personnel cycle. Business Functions in the Cycle and Related Documents and Records The payroll and personnel cycle…. Begins Hiring of personnel Ends Payments Personnel and Employment  Personnel records  Deduction authorization form  Rate authorization form Timekeeping and Payroll Preparation Time Card Job Time Ticket Payroll Transaction File Payroll Journal Timekeeping and Payroll Preparation Payroll Master File A payroll master file is used for recording each payroll transaction for each employee and maintaining total employee wages paid for the year to date. Payment of Payroll  Payroll check  Payroll bank account reconciliation Preparation of Payroll Tax Returns and Payment of Taxes  W-2 Form  Payroll tax returns Learning Objective 3 Understand internal control and design and perform tests of controls and substantive tests of transactions for the payroll and personnel cycle. Methodology for Designing Controls and Substantive Tests Understand internal control – payroll and personnel Assess planned control risk – payroll and personnel Determine extent of testing controls Audit procedures Design tests of controls and Sample size substantive tests of transactions for payroll and personnel to meet Items to select transaction-related audit objectives Timing Understand Internal Control – Payroll and Personnel Cycle  Adequate separation of duties  Proper authorization  Adequate documents and records  Physical control over assets and records  Independent checks on performance Payroll Tax Forms and Payments  Preparation of payroll tax forms  Timely payment of the payroll taxes withheld and other withholdings Inventory and Fraudulent Payroll Considerations  Relationship between payroll and inventory valuation  Tests for nonexistent employees Methodology for Designing Tests of Balances for Payroll Liabilities Identify client business risks affecting payroll liability accounts Phase I Set tolerable misstatement and assess inherent risk Phase I for payroll liability accounts Assess control risk for the Phase I payroll and personnel cycle Methodology for Designing Tests of Balances for Payroll Liabilities Design and perform tests of controls and substantive tests Phase II of transactions for the payroll and personnel cycle Methodology for Designing Tests of Balances for Payroll Liabilities Design and perform analytical procedures Phase III for the payroll and personnel cycle Design tests of Audit procedures details of payroll Sample size accounts balances to satisfy Items to select balance-related Timing audit objectives Phase III