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Payroll & Personnel Cycle, Substantive procedures: payroll &…
Payroll & Personnel Cycle
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Documents in cycle
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List of employees
List of valid employees & details, necessary for computing wages & salaries, provided by personnel
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Payroll (wage journal)
Spreadsheet that lists employees' names, work section or cost centre, overtime hours and normal hours worked, gross pay, deductions, and net pay
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Personnel (HR)
Control activities: (i) all requests for appointment or dismissal of employees must originate from section making request, (ii) request must be signed by section head & countersigned by section manager after reference to budget, (iii) changes to pay rates, promotions to higher roles and other changes must be decided upon by personnel dept
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Timekeeping
Control activities: entry/exit points to work area limited / protected by turnstiles & supervised during clocking periods
Risks: invalid hours recorded by clocking a card for fictitious employee/employees clocking for absent employees
Payroll preparation
Control activities: wage clerk prepare the payroll & recon; supervisor or second clerk must verify computations and sign payroll
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Payment prep & payout
Control activities: wage packets made up by 2 wage dept members; on delivery of wage packets, section head should agree number of pay packets to payroll; pay packets locked away until payout; wage payout conducted by 2 employees; employees must provide identification, sign in acknowledgment of receipt of pay packets; not allowed to collect for other employees
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Auditing cycle
Risk of material misstatement in salaries & wages not normally deemed high even if they make up a large portion of a company's expense
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Presentation: Auditor must be concerned with these assertions: (a) completeness; (b) classification & understandability; (c) accuracy & valuation
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