TEST OF CONTROLS OVER PAYROLL TRANSACTIONS

WP Done
AUDIT PROCEDURES
Ref By Date
1. Review the payroll journal, general ledger, and
payroll earnings records for large or unusual
amounts.
2. Compare cancelled checks with payroll jiurnal for
name, amount, and date.
3. Examine cancelled checks for proper endorsement.
4. Compare cancelled checks with personnel records.
5. Reconcile the disbursements in the payroll journal
with the disbursements on the payroll bank
statement
6. Prove the bank reconciliation.
7. Recompute hours worked from time cards.
8. Compare pay rates with union contract, approval by
board of directors, or other source.
9. Recompute gross pay.
10. Check withholdings by reference to tax tables and
authorization forms in personnel file.
11. Recompute net pay.
12. Compare cancelled check with payroll journal for
amount
13. Compare classification with chart of accounts or
procedures manual
14. Review time card for employee department and job
ticket for job assignment, and trace through to labor
distribution.
15. Compare date of recorded check in the payroll
journal with date on cancelled checks and time card
16. Compare date on check with date the check cleared
the bank
17. Test clerical accuracy by footing the payroll journal
and tracing postings to the general leger and the
payroll Masterfile
 SUBSTANTIVE TESTING FOR PAYROLL TRANSACTIONS
Assertions Audit Objectives
Existence or Occurrence To determine that recorded
payroll transactions occurred
Completeness To determine that all payroll
earned by employees is
recorded
Rights and Obligations To determine that recorded
payroll transactions are for
Audit Procedures
1. Check the personnel
records to ascertain
whether the persons
paid were actually
employed during the
pay period tested.
2. Observe actual payroll
distribution
3. Investigate the bank’s
method of handling
unclaimed pay.
4. Trace the payroll
tested to summaries,
trace postings to
summary totals to the
general ledger and to
subsidiary ledgers,
and check the
propriety of the
accounting
distribution.