Arens14e_ch20_ppt

Audit of the Payroll and Personnel Cycle Chapter 20 http://downloadslide.blogspot.com

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Learning Obecti!e " #dentify the accounts and transactions in the payroll and personnel cycle.

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

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Accounts in the Payroll and Personnel Cycle  $he o!erall obecti!e in the audit of the payrol payrol 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.

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

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Accounts in the Payroll and Personnel Cycle Accrued Wages, Salaries, Bonuses, and Commissions Cash in Bank  Payment or salaries Payment or !ayroll ta"es

Direct Labor

Payment Beginning balance Earned wages, salaries, etc. Ending balance Withheld #ncome $a"es and %ther Deductions Payment Beginning balance Payroll withholding Ending balance

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

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Accounts in the Payroll and Personnel Cycle #n most systems the accrued wages and salaries account is used only at the end of an accounting period.

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

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Learning Obecti!e 2 &escribe the business functions and the related documents and records in the payroll and personnel cycle.

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

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'usiness (unctions in the Cycle and )elated &ocuments and )ecords  $he payroll and personnel cycle*. 'egins

Personnel +iring

,nds

Payments

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

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Personnel and ,mployment  Personnel  &eduction  )ate

records authori-ation form

authori-ation form

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

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 $imeeeping and Payroll Preparation $ime Card  &ob $ime $icket Payroll $ransaction 'ile Payroll &ournal

 $imeeeping and Payroll Preparation

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

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Payroll aster (ile (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.

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

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Payment of Payroll  Payroll

chec

 Payroll

ban account reconciliation

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

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Preparation of Payroll $a1 )eturns and Payment of $a1es  32

(orm

Payroll

ta1 returns

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

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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.

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

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ethodology for &esigning Controls and 6ubstanti!e $ests (nderstand internal control ) !ayroll and !ersonnel Assess !lanned control risk ) !ayroll and !ersonnel Determine e"tent o testing controls Design tests o controls and Audit !rocedures substanti+e tests o transactions Sam!le si*e or !ayroll and !ersonnel to meet #tems to select transactionrelated audit $iming ob-ecti+es ©2012 Prentice Hall Business Publishing,  Auditing 14/e, Arens/Elder/Beasley 14/e, Arens/Elder/Beasley

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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

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

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Payroll $a1 (orms and Payments  Preparation

of payroll ta1 forms

 $imely

payment of the payroll ta1es withheld and other withholdings

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

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#n!entory and (raudulent Payroll Considerations 

)elationship between payroll and in!entory !aluation



$ests for none1istent employees

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

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ethodology for &esigning $ests of 'alances for Payroll Liabilities #dentify client business riss a%ecting Phase # payroll liability accounts 6et tolerable misstatement and assess inherent ris Phase # for payroll liability accounts Assess control ris for the Phase # payroll and personnel cycle ©2012 Prentice Hall Business Publishing,  Auditing 14/e, Arens/Elder/Beasley 14/e, Arens/Elder/Beasley

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ethodology for &esigning $ests of 'alances for Payroll Liabilities &esign and perform tests of controls and substanti!e tests Phase ## of transactions for the payroll and personnel cycle

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

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ethodology for &esigning $ests of 'alances for Payroll Liabilities &esign and perform analytical procedures Phase ### for the payroll and personnel cycle &esign tests of  Audit procedures details of payroll 6ample si-e accounts balances to satisfy #tems to select balance3related  $iming audit obecti!es ©2012 Prentice Hall Business Publishing,  Auditing 14/e, Arens/Elder/Beasley 14/e, Arens/Elder/Beasley

Phase ###

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Learning Obecti!e 9 &esign and perform analytical procedures for the payroll and personnel cycle.

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

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na yt ca Proce roce ures or Ana the Payroll and Personnel Cycle Analytical !rocedure

Possible misstatement

Com!are !ayroll e"!ense account balances with !re+ious years

isstatement o !ayroll e"!ense accounts

Com!are direct labor as a !ercentage o sales with !re+ious years

isstatement o direct labor and in+entory

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

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na yt ca Proce roce ures or Ana the Payroll and Personnel Cycle Analytical !rocedure

Possible misstatement

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" isstatement o !ayroll e"!ense as a / o salaries ta" e"!ense and !ayroll and wages with !rior year ta" liability Com!are accrued !ayroll isstatement o accrue ta" accounts with !rior year!ayroll ta"es and e"!en ©2012 Prentice Hall Business Publishing,  Auditing 14/e, Arens/Elder/Beasley 14/e, Arens/Elder/Beasley

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Learning Obecti!e  &esign and perform tests of details of balances for accounts in the payroll and personnel cycle.

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

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 $wo aor 'alance3related Audit Obecti!es ". Accruals in the trial balance are stated at the correct amounts ;accuracy