Arens14e_ch20_ppt

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5 - 5

Audit

Audit of the

of the P

Payroll

ayroll

Audit

of the

P

ayroll

and Personnel Cycle

Chapter 20

Chapter 20 http://downloadslide.blogspot.com

http://downloadslide.blogspot.com

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©2012 Prentice Hall Business Publishing, Auditing 14/e, Auditing 14/e, Arens/Elder/Beasley Auditing 14/e, Auditing 14/e, Arens/Elder/Beasley Arens/Elder/Beasley Arens/Elder/Beasley 20 -20 -20 -20 -2222

L

Learning Obecti!e

earning Obecti!e "

"

L

earning Obecti!e

"

#dentify the accounts and transactions

in the payroll and personnel cycle.

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©2012 Prentice Hall Business Publishing, Auditing 14/e, Auditing 14/e, Arens/Elder/Beasley Auditing 14/e, Auditing 14/e, Arens/Elder/Beasley Arens/Elder/Beasley Arens/Elder/Beasley 20 -20 -20 -20 -3333

$he o!erall obecti!e

in the audit of the pa

yrol

and personnel cycle is to e!aluate whether th

account balances a%ected by the

cycle are

fairly stated in accordance with generally

accepted accounting principles.

Accounts in the Payroll and

Personnel Cycle

(5)

Accounts in the Payroll and

Personnel Cycle

Accrued Wages, Salaries,

Bonuses, and Commissions

Payment Beginning

balance

Earned wages,

salaries, etc.

Ending balance

Direct

Labor

Cash in Bank

Payment or

salaries

Payment or

!ayroll ta"es

Withheld #ncome $a"es

and %ther Deductions

Payment Beginning

balance

Payroll

withholding

(6)

Accounts in the Payroll and

Personnel Cycle

#n most systems the accrued wages and

salaries account is used only at the

(7)

Learning Obecti!e 2

&escribe the business functions and

the related documents and records in

the payroll and personnel cycle.

(8)

'usiness (unctions in the

Cycle and )elated

&ocuments and )ecords

$he payroll and personnel cycle*.

'egins

Personnel

+iring

(9)

Personnel and ,mployment



Personnel records



&eduction authori-ation form

(10)

$imeeeping and Payroll

Preparation

$ime Card

&ob $ime $icket

Payroll $ransaction 'ile

Payroll &ournal

$imeeeping and

Payroll Preparation

(11)

Payroll aster (ile

A payroll master le is used for

recording each payroll transaction

for each employee and maintaining total

employee wages paid for the year to date.

(12)

Payment of Payroll



Payroll chec

(13)

Preparation of Payroll $a1

)eturns and Payment of $a1es



32 (orm

(14)

Learning Obecti!e 4

5nderstand internal control and design

and perform tests of controls and

substanti!e tests of transactions for

the payroll and personnel cycle.

(15)

ethodology for &esigning

Controls and 6ubstanti!e $ests

(nderstand internal control ) !ayroll and !ersonnel

Audit !rocedures

Sam!le si*e

#tems to select

$iming

Assess !lanned control risk ) !ayroll and !ersonnel

Determine e"tent o testing controls

Design tests o controls and

substanti+e tests o transactions

or !ayroll and !ersonnel to meet

transactionrelated audit

ob-ecti+es

(16)

5nderstand #nternal Control

7Payroll and Personnel Cycle



_{Ade8uate separation of duties}



_{Proper authori-ation}



_{Ade8uate documents and records}



_{Physical control o!er assets and records}



_{#ndependent checs on performance}

(17)

Payroll $a1 (orms and

Payments



Preparation of payroll ta1 forms



$imely payment of the payroll ta1es

withheld and other withholdings

(18)

#n!entory and (raudulent

Payroll Considerations



)elationship between payroll

and in!entory !aluation

(19)

#dentify client business

riss a%ecting

payroll liability accounts

ethodology for &esigning $ests

of 'alances for Payroll Liabilities

6et tolerable misstatement

and assess inherent ris

for payroll liability accounts

Assess control ris for the

payroll and personnel cycle

Phase #

(20)

ethodology for &esigning $ests

of 'alances for Payroll Liabilities

&esign and perform

tests of controls and

substanti!e tests

of transactions

for the payroll and

personnel cycle

(21)

$iming

#tems to select

6ample si-e

Audit procedures

ethodology for &esigning $ests

of 'alances for Payroll Liabilities

&esign and perform

analytical procedures

for the payroll and

personnel cycle

&esign tests of

details of payroll

accounts balances

to satisfy

balance3related

audit obecti!es

Phase ###

(22)

Learning Obecti!e 9

&esign and perform analytical

procedures for the payroll and

personnel cycle.

(23)

Ana yt ca Proce ures or

na yt ca roce ures or

the Payroll and Personnel

Cycle

Com!are direct labor as a

!ercentage o sales with

!re+ious years

isstatement o direct

labor and in+entory

Analytical !rocedure

Com!are !ayroll e"!ense

account balances with

!re+ious years

isstatement o !ayroll

e"!ense accounts

(24)

Ana yt ca Proce ures or

na yt ca roce ures or

the Payroll and Personnel

Cycle

Analytical !rocedure

Com!are commission

e"!ense as a / o

sales with !re+ious years

isstatement o

commission e"!ense

and commission liabilit

Com!are !ayroll ta"

e"!ense as a / o salaries

and wages with !rior year

isstatement o !ayroll

ta" e"!ense and !ayroll

ta" liability

Possible misstatement

Com!are accrued !ayroll

ta" accounts with !rior year

isstatement o accrue

!ayroll ta"es and e"!en

(25)

Learning Obecti!e 

&esign and perform tests of details of

balances for accounts in the payroll

and personnel cycle.

(26)

$wo aor 'alance3related

Audit Obecti!es

". Accruals in the trial balance

are stated at the correct

amounts ;accuracy<.

2. $ransactions in the payroll and

personnel cycle are recorded

in the proper period ;cuto%<.

(27)

$ests of &etails of 'alances

for Liability Accounts



_{Amounts withheld from employees= pay}



_{Accrued salaries and wages}



_{Accrued commissions}



Accrued bonuses



_{Accrued !acation pay> sic pay> or other bene}



_{Accrued payroll ta1es}

(28)

$ests of &etails of 'alances

for ,1pense Accounts



_{O?cers= compensation}



_Commissions



_{Payroll ta1 e1pense}



_{$otal payroll}

(29)

Presentation and &isclosure

Obecti!es



)e8uired disclosures are not e1tensi!e



6ome comple1 transactions re8uire

footnote disclosure

(30)

$ypes of Audit $ests for the

Payroll and Personnel Cycle

$%C 0 S$%$ 0 AP 0 $DB

1 Su2cient a!!ro!riate e+idence !er 3AAS

Cash in

Bank

Liabilities

Payroll

Payroll E"!enses

Direct Labor and

Payments

E"!enses

Audited by

$%C, S$%$, and AP

Ending

balance

Ending

Audited by AP and $DB

Audited by