Auditing payroll is very complicated in an organization where huge employees are working e.g. more than 3,000 employees.
it's time wasting to re-calculating the salary amounts so we will have to perform the audit procedures and test of controls to have reasonable assurance regarding the payroll amounts/salaries.
There are some steps I use to follow while auditing the payroll, these are as follows:
1) Over time:
Extract the overtime reports and Perform Test of controls on overtime recorded in the payroll, verify that all over time is approved by the appropriate manager etc.
2) Additions / New employees hired:
Verify the additions to the payroll (new employees hired during the month), new hiring should be approved as per company policies.
The pay scale or basis salaries should be verified that these are according to approval or company policy.
3) Deletions / Employees left during the month:
Check that the employee left the job during the period have been properly removed from the payroll so that there salaries could not be processed as they are no longer employees of the company.
4) Increments, Promotions / demotions during the month:
Calculate the increase or decrease in the pay scale (salaries) of the employees, check the approval for the change in pay scale of the employees during the month, there might be batch increments processed each month for the selected employees e.g. employee who joined the company in the month of February will be provided an increment in the month of February each year.
Batch increments will avoid a huge increase in the payroll amount at a time the cost is split over the period.
an analytical review can be performed over the increments processed and also it can be reconciled by adding the changes to the opening pay scale (total payroll) e.g.
Total opening pay scale (last month)
add: Additions / new employees hired during the month
Less: Deletions / employees left or terminated during the month
Add: Increments processed / increase in the salaries of the employees (Net of demotions)
Add/(Less): other changes in the pay scales of the employees e.g. in many company direct labor or supervisors are being paid on piece rate system or performance based pay so their pay scale will not be the consistent it varies month to month.
Closing pay scale as per Audit working
Closing pay scale as per payroll processed
Difference
If difference is material then it should be investigated and ignored if it is immaterial.
5) Loans to employees:
Verify the additions (the employees who have been paid the loan during the month) with the approval or according to the company policies.
Verify the deletions (employee whose loans have been removed from the payroll, verify their settlements etc.
Check that loan deductions are according to standard deduction or according to loan repayment schedule etc.
check ledger entries are properly made in the relevant loans subsidiary ledger accounts.
6) Advances to employees:
Check that all advances have been deducted from the salaries of the employees who were paid the advances during the month.
7) Fuel / Conveyance Allowances:
Calculate the additions during the month in the payroll for Fuel or conveyance allowance and verify the approvals.
Prepare analytical review report for over all payroll, e.g. comparison between the last month and current month's payroll figures in depth etc.
There might be any other content in the payroll depending the company's payroll structure e.g. Incentive paid to employee etc.
To download the working papers go to the following website and complete a survey to get access the unlimited working paper downloads.
http://auditworkingpapers.weebly.com/
it's time wasting to re-calculating the salary amounts so we will have to perform the audit procedures and test of controls to have reasonable assurance regarding the payroll amounts/salaries.
There are some steps I use to follow while auditing the payroll, these are as follows:
1) Over time:
Extract the overtime reports and Perform Test of controls on overtime recorded in the payroll, verify that all over time is approved by the appropriate manager etc.
2) Additions / New employees hired:
Verify the additions to the payroll (new employees hired during the month), new hiring should be approved as per company policies.
The pay scale or basis salaries should be verified that these are according to approval or company policy.
3) Deletions / Employees left during the month:
Check that the employee left the job during the period have been properly removed from the payroll so that there salaries could not be processed as they are no longer employees of the company.
4) Increments, Promotions / demotions during the month:
Calculate the increase or decrease in the pay scale (salaries) of the employees, check the approval for the change in pay scale of the employees during the month, there might be batch increments processed each month for the selected employees e.g. employee who joined the company in the month of February will be provided an increment in the month of February each year.
Batch increments will avoid a huge increase in the payroll amount at a time the cost is split over the period.
an analytical review can be performed over the increments processed and also it can be reconciled by adding the changes to the opening pay scale (total payroll) e.g.
Total opening pay scale (last month)
add: Additions / new employees hired during the month
Less: Deletions / employees left or terminated during the month
Add: Increments processed / increase in the salaries of the employees (Net of demotions)
Add/(Less): other changes in the pay scales of the employees e.g. in many company direct labor or supervisors are being paid on piece rate system or performance based pay so their pay scale will not be the consistent it varies month to month.
Closing pay scale as per Audit working
Closing pay scale as per payroll processed
Difference
If difference is material then it should be investigated and ignored if it is immaterial.
5) Loans to employees:
Verify the additions (the employees who have been paid the loan during the month) with the approval or according to the company policies.
Verify the deletions (employee whose loans have been removed from the payroll, verify their settlements etc.
Check that loan deductions are according to standard deduction or according to loan repayment schedule etc.
check ledger entries are properly made in the relevant loans subsidiary ledger accounts.
6) Advances to employees:
Check that all advances have been deducted from the salaries of the employees who were paid the advances during the month.
7) Fuel / Conveyance Allowances:
Calculate the additions during the month in the payroll for Fuel or conveyance allowance and verify the approvals.
Prepare analytical review report for over all payroll, e.g. comparison between the last month and current month's payroll figures in depth etc.
There might be any other content in the payroll depending the company's payroll structure e.g. Incentive paid to employee etc.
To download the working papers go to the following website and complete a survey to get access the unlimited working paper downloads.
http://auditworkingpapers.weebly.com/
Nice information on here, I would like to share with you all my experience trying to get a loan to expand my Clothing Business here in Malaysia. It was really hard on my business going down due to my little short time illness then when I got heal I needed a fund to set it up again for me to begin so I came across Mr Benjamin a loan consultant officer at Le_Meridian Funding Service He asked me of my business project and I told him i already owned One and i just needed loan of 200,000.00 USD he gave me form to fill and I did also he asked me of my Valid ID in few days They did the transfer and my loan was granted. I really want to appreciate there effort also try to get this to anyone looking for business loan or other financial issues to Contact Le_Meridian Funding Service On Email: lfdsloans@lemeridianfds.com / lfdsloans@outlook.com He also available on WhatsApp Contact:+1-9893943740.
ReplyDelete