Session 6: Audit Evidence, Internal Control and Audit testing.
• Internal Controls Systems Over The Payroll Cycle
• Internal Control Checklists For The Payroll Cycle
• Tests Of Control Of Payroll
• Internal Controls Systems Over The Stock Cycle
• Internal Control Checklists For The Stock Cycle
• Tests Of Control Of Stock
INTERNAL CONTROLS OVER PAYROLL
To understand the need for controls, it is helpful to break down the payroll process into its component stages.
The table shows the various stages of the payroll “cycle”, together with:
|Stage in Cycle |Risks/Objectives |Procedures | |Salary Info collected from |Staff punch clock cards for friends |All timesheets signed off as correct by line managers | |clock cards, timesheets etc|Timesheets claim false hours |Clock card machine in open view | | |Overtime is claimed that was never worked |Clocking in/out supervised | | | |Clock cards kept somewhere secure when not in use | | | |Clock cards sequenced, and sequence checked each day | | | |Clock cards checked to personnel records, to ensure no | | | |fake employees | | | |All overtime authorised in advance, and reviewed when | | | |claimed | |Adjustments made for |Start/leaving dates wrong |Take references, and check qualifications, of new staff| |Starters |Staff who leave continue to get paid |New staff sign personnel form, with photo | |Leavers |Payroll details changed to redirect money |Random head counts | |Pay rises |Fake pay rises put through |Leavers Form, signed by leaver and manager | |Overtime |New employees do not exist |Personnel records kept secure | | | |All pay data on computer password protected | | | |Regular check of pay data to personnel files | |Gross wages calculated |Inaccurate calculations |Random check of calculations by manager | | | |Use computerised payroll package | | | |Use outside payroll bureau | |Taxes (and other things) |Calculations could be wrong |Random checks of calculations by manager | |deducted |Failure to update system for tax changes |Any amendments to tax data authorised by manager | | | |Regular check of tax rates to law | |Payroll produced, with pay |Incomplete set of payslips |Payslips numbered, and checked back to calculations and| |list for Bank |Pay list incorrect |personnel files | | | |Pay list reviewed by managers to ensure figures look | |...