International Journal of Management (IJM)

Volume 11, Issue 5, May 2020, pp. 307-319, Article ID: IJM_11_05_030
Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=5
Journal Impact Factor (2020): 10.1471 (Calculated by GISI) www.jifactor.com
ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.11.5.2020.030

© IAEME Publication Scopus Indexed

IMPROVING THE ACCOUNTING AND

AUDITING OF PAYROLL CALCULATIONS
Valentyna Panasyuk
Department of Accounting and Taxation, Ternopil National Economic University,
Ternopil, Ukraine

Mariya Lalakulych
Department of Accounting, Uzhgorod Trade and Economic Institute of Kyiv National
University of Trade and Economics, Uzhhorod, Ukraine

Erika Yuhas
Department of Accounting, Uzhgorod Trade and Economic Institute of Kyiv National
University of Trade and Economics, Uzhhorod, Ukraine

Lesya Rybakova
Uzhgorod Trade and Economic Institute of Kyiv National University of Trade and
Economics, Uzhhorod, Ukraine

Vitaliy Bobrivets
Department of Economic Expertise and Business Audit, Ternopil National Economic
University, Ternopil, Ukraine

ABSTRACT
The study is devoted to the methodological foundations of accounting and audit of
settlements with employees. The organization of accounting and audit of agreements
with employees at Ukrainian enterprises is studied, and ways to improve the
accounting of settlements with employees and cases of erroneous accounting, as well
as the lack of internal audit are identified. On the example of two real enterprises, the
authors demonstrated how to improve and refine: proposed to use CLN contracts,
proposed a schedule of primary accounting documents, analytical sub-accounts and
an audit program for payroll.
Key words: Accounting, Auditing, CLN Contract, Payroll, Wages
Cite this Article: Valentyna Panasyuk, Mariya Lalakulych, Erika Yuhas,
Lesya Rybakova, Vitaliy Bobrivets, Improving the Accounting and Auditing of
Payroll Calculations. International Journal of Management, 11 (5), 2020, pp. 307-319.
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 Valentyna Panasyuk, Mariya Lalakulych, Erika Yuhas, Lesya Rybakova, Vitaliy Bobrivets

1. INTRODUCTION
To function successfully in a market economy, the company must have a type of economic
behaviour that would adapt to dynamic environmental conditions. At the same time, a unique
role is played by the use of effective methods of labour management, which would ensure the
interest of employees in highly productive work and improve the results of the enterprise. At
the present stage, the primary means of forming such an interest is wages, which reflects the
quantity and quality of labour expended by the employee [1-4].
The problem of organizing settlements with employees at the enterprise is one of the most
acute because in decline in sales, reduction in the number of employees there are changes in
the organization of labour and its payment [5-7]. That is why the problem of improving
payroll calculations is relevant.
The issues that remain controversial include the organization of accounting for deductions
and deductions from employees' salaries, automation of settlements with staff. Many scholars
[8-12] have dealt with this issue, and there are many sources for defining the concept of
wages, its types and taxation. Still, the task of our study is to study the problems of
accounting and auditing of payroll calculations in real enterprises and offer recommendations
to help improve it and avoid penalties for improper accounting.

2. IDENTIFYING AREAS FOR POSSIBLE IMPROVEMENT OF

ACCOUNTING AND AUDIT OF PAYROLL CALCULATIONS
The analysis of accounting for settlements with employees at Ukrainian enterprises revealed
several cases of incorrect settlements with employees:
1. At the enterprise "Techinmash" PJSC (Ternopil) there is an hourly wage – 25.13 UAH /
hour. If the month is less than the norm of working hours in hours, the company pays such
workers a minimum wage – 4173.00 UAH. Thus, additional losses of the enterprise can
amount to UAH 4,147.87 in 2019.
2. In January 2020, a new department was established at "Aparan" LLC (Uzhhorod), the head
of which, by prior agreement, does not receive a salary, but only interest in sales. There were
no sales in January and February, so nothing was charged to the manager. This is wrong
because there is a constitutionally guaranteed remuneration for work, as well as the
requirements of the Labour Code of Ukraine and the Law of Ukraine "On Remuneration of
Labour". From 02.02.2020, fines for violations of labour legislation and wages increased.
Thus, for such a breach of labour legislation, the company will incur, first, an administrative
penalty – from 1700 UAH; secondly, financial sanctions – from 1 (from 01.01.2020 it is 4723
UAH) to 10 minimum salaries (it is 47230 UAH). The company does not conduct an audit of
settlements with employees, and it would be able to identify the above cases on time to enable
the company to correct errors on time.

3. RESULTS AND DISCUSSION

3.1. Accounting and Auditing of Payroll Calculations for "Techinmash" PJSC
For "Techinmash" PJSC we suggest two ways out of the situation:
a) pay for work only within the hours worked. The laws on the State Budget for the respective
year determine the minimum wage in monthly and time amounts. In 2020, it is set at UAH
4723.00. and UAH 28.31. in accordance. When the employee's work is paid by the hour, the
reference point for compliance with the minimum wage is the minimum wage in the amount
set by the Law on the State Budget for the year; this is stated in the letter of the Ministry of
Social Policy of Ukraine dated 21.02.17 № 242/0/102-17/282: for employees who have
monthly salaries with the norm of a month, the minimum state guarantee in remuneration is

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 Improving the Accounting and Auditing of Payroll Calculations

the minimum wage in the monthly amount, and for employees with hourly wages – the
minimum wage in the amount of time.
Thus, if the hourly wage of an employee is UAH 28.31 / hour, then the requirement for the
level of the minimum wage is met, and the amount of the minimum wage in the monthly
amount is not taken into account in payments.
However, in the collection of a single social contribution in all cases, you need to focus on
the minimum wage in the monthly amount – 4723.00 UAH. Thus, Part 5 of Article 8 of the
Law of Ukraine "On Collection and Accounting of the Single Contribution for Compulsory
State Social Insurance" dated 08.07.10 № 2464-VI provides: if the basis for accrual of the
single contribution does not exceed the amount of the minimum wage, established by law for
the month for which the income is received, the amount of the contribution is calculated as the
product of the minimum wage, determined by law for the month for the income (profit), and
the single contribution rate (except for cases specified, for example, in the SFSU letter of
29.01.16 № 1394/5/99-99.17-03-03-1). So, in cases where the working time is less than 166
works hours and, as a result, the amount of salary for the month may be less than 4723.00
UAH, you need to add a single contribution to the minimum tax base.
b) to build relationships with such employees on another legal basis, in particular, it is
possible to perform work under contracts of civil law nature. CLN is concluded in writing and
contains information about the description of the work that the contractor undertakes to
perform to the customer, the timing of these works, as well as the terms of their payment.
Under the CLN contract, the executor (contractor) does not obey the rules of internal labour
regulations, he organizes his work and performs it at his own risk. A natural person who has
entered into a CLN contract is not included in the customer's staff. It is not covered by the
guarantees and benefits established by labour legislation. Under the CLN contract, it is not the
work process that is paid for, but its results. Hourly wages cannot be applied to CLN
contracts.
The results of work under the CLN contracts are determined after the end of the work and
formalized by acts of acceptance-delivery of the performed works (rendered services), based
on which their payment is made. However, the CLN contract may provide for advance (or
phased) remuneration. When performing works (services) under the CLN agreements, no
entries are made in the contractor's employment record book.
At the same time, the law does not prohibit the conclusion of contracts of a civil nature
between the company and its employees from performing work or providing services in free
time from the main work under the employment contract, i.e. in free time; other employees
can also tell guests about the sights architecture. In particular, the Ministry of Labour and
Social Policy of Ukraine in its letter of August 6, 2004, № 18-429 clarifies that the employer
may enter into a contract with its employee who is on regular leave for the period of leave for
the employee to perform certain work.
In practice, the most commonly used two types of contracts under the Civil Code of
Ukraine, under which individuals can be involved in the work of both legal entities and
individuals. This is a contract and a contract for the provision of services, but we are
interested in the latter. Consider in more detail the procedure for concluding this contract for
the provision of services to understand its differences from the employment contract.
The concept of a contract for the provision of services and the procedure for its
application are defined by the Central Committee of Ukraine (Chapter 63).
Under the contract for the provision of services following Article 901 of the Civil Code of
Ukraine, one party (performer) undertakes on behalf of the other party (customer) to provide a

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 Valentyna Panasyuk, Mariya Lalakulych, Erika Yuhas, Lesya Rybakova, Vitaliy Bobrivets

service consumed in the course of a certain action or activity. The customer undertakes to pay
the contractor unless otherwise provided by the contract.
The contractor must provide the service in person. In cases established by the contract, the
contractor has the right to entrust the performance of the contract for the provision of services
to another person, remaining fully liable to the customer for breach of contract. If the contract
provides for the provision of services for a fee, the customer is obliged to pay for the service
provided to him in the amount, on time and in the manner prescribed by this contract. The
term of the contract for the provision of services is set by agreement of the parties unless
otherwise provided by law or other regulations. Losses caused to the customer by non-
performance, or improper performance of the contract for the provision of services for a fee
shall be reimbursed by the contractor, in the presence of his fault, in full, unless otherwise
provided by the contract. The contract for the provision of services may be terminated, in
particular through unilateral withdrawal from the contract, in the manner and on the grounds
established by the Central Committee of Ukraine, another law or by agreement of the parties.
The procedure and consequences of termination of the contract for the provision of services
are determined by agreement of the parties or by law.
Despite some similarities between the contract and the service contract, the main
difference between them is that under the service contract the result of work is usually not
transferred to the customer, because the service provided under such a contract is inseparable
from the process of its provision (such as excursion services, services for the protection of the
object or own protection, services for legal support of the activity of a certain subject, services
for cleaning of the premises or territory, etc.).
The difference between a civil contract and an employment contract. Sometimes the
nature and procedure of certain works (in particular, the provision of services) resemble the
functional responsibilities of the employee under the employment contract, which, in turn,
makes it difficult in practice to distinguish between civil and employment contracts, and often
generates in this regard, disputes between the parties.
Since the conclusion of an employment contract and a contract of a civil nature have
different legal consequences, the latter should be distinguished from employment contracts on
certain grounds (Table 1).

Table 1 Differences between the employment contract and the contract of a civil law nature
Contract of a civil law nature (contract or
Employment contract
provision of services)
Legislative regulation of relations
The employment contract is concluded following The contract (provision of services) is
the Labor Code of Ukraine and regulations adopted concluded following the provisions of the
on its basis Civil Code of Ukraine
The concept of contract
CLN contract is an agreement between two or
more parties aimed at establishing, changing
An employment contract is an agreement between or terminating civil rights and obligations as
an employee and an employer under which the defined (Art. 626 of the CCU). Under the
employee undertakes to perform the work specified contract, one party (contractor) undertakes to
in this agreement, subject to internal labour perform specific work at the risk of the other
regulations, and the employer undertakes to pay the party (customer), and the customer undertakes
employee wages and provide working conditions to accept and pay for the work performed (Art.
necessary for work provided by law labour, 837 of the CCU). Under the contract for the
collective agreement and agreement of the parties provision of services, one party (performer)
(Art. 21 of the LCU). undertakes on behalf of the other party
(customer) to provide a service that is
consumed in the process of performing a

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 Improving the Accounting and Auditing of Payroll Calculations

specific action or carrying out certain

activities, and the customer undertakes to pay
the contractor (Art. 901 of the CCU).
The scope of the contract
The subject of the employment contract is the
Under a CLN contract, the subject of the
labour process, i.e., the employee performs a
contract is the final result, i.e. the performance
specific job function in a particular speciality,
by the contractor/executor of the agreed work
qualification, position, usually without achieving
aimed at achieving the final result.
any result.
The term of the contract
A contract or provision of services may not be
An employment contract can be: indefinite, concluded for an indefinite period, as the
concluded for an indefinite period; for a specified performance of a particular job is conditioned
period set by agreement of the parties; such that is by a specific time of its production. Therefore,
concluded at the time of performance of individual in such contracts, as a rule, by agreement of
work. In this case, a fixed-term employment the parties, the terms of performance of work
contract is concluded in cases where the or its separate stages are established. If the
employment relationship can not be established for contract does not set such deadlines, the
an indefinite period, taking into account the nature contractor must perform the job, and the
of subsequent work, or conditions of its customer has the right to demand its
implementation, or the interests of the employee performance within a reasonable time, which
and in other cases provided by law (Art. 23 of the would correspond to the nature of the
LCU). obligation, nature and scope of work and
practice of business relations (p. 2 of Art. 846
of the CCU).
Conditions and procedure for work
The employee must perform the task assigned to
him personally and has no right to delegate its
performance to another person, except as provided The contractor has the right unless otherwise
by law (Art. 30 of the LCU). At the same time, he provided by contract, to involve third parties
must also work honestly and conscientiously, (subcontractors) in the performance of work,
timely and accurately comply with the instructions while remaining responsible to the customer
of the employer, comply with labour and for the result of their work (Art. 838 of the
technological discipline, the requirements of CCU). Under the service agreement, the
regulations on labour protection, treat the property contractor must provide the service in person.
with care (Art. 139 of the LCU). In turn, the But, in the cases established by the contract,
employer must properly organize the work of the executor has the right to put the
workers, create conditions for productivity growth, performance of the contract on another person,
ensure labour and production discipline, strictly remaining responsible before the customer in
comply with labour laws and labour protection full for breach of the contract (Art. 902 of the
rules, pay attention to the needs and demands of CCU).
workers, improve their working and living
conditions (Art. 141 of the LCU).
Remuneration
The amount of wages depends on the complexity
and conditions of work performed, professional and
business qualities of the employee, the results of his
work and economic activity of the enterprise and
may not be less than the minimum wage established
The amount, procedure and terms of payment
by law. Wages are paid to employees regularly on
of remuneration for work performed (services
working days within the time limits set by the
provided) are determined by the parties and
collective agreement or regulatory act of the
specified in the contract and do not depend on
employer, agreed with the elected body of the
the amount of the minimum wage.
primary trade union, but at least twice a month for a
period not exceeding 16 calendar days and not later
than seven days after the end of the period for
which the payment is made (Article 115 of the
LCU).

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 Valentyna Panasyuk, Mariya Lalakulych, Erika Yuhas, Lesya Rybakova, Vitaliy Bobrivets

The above list of differences between the employment contract and contracts of a civil
nature, under which citizens can be involved in work, is not exhaustive. Understanding the
legal nature of these types of agreements, their proper application - the key to avoiding
possible misunderstandings and disputes between the parties.
According to court practice, contractors or contractors who did not understand the
consequences of concluding these contracts often go to court to refuse leave, pay for
temporary incapacity for work, make entries in the employment record book, etc. In some
cases, the court satisfies such claims by recognizing the concluded employment contracts, if,
during the consideration of the case in court, they establish appropriate evidence that the
relationship had signs of labour.
Therefore, it is necessary to avoid such situations in which the relationship between the
parties to the CLN contract can be regarded as labour:
 the owner acquainted the employee with the working conditions against a receipt;
 in the agreement of civil law nature, it is specified that the executor has to adhere to industrial
discipline, safety measures, fire safety;
 the executor undertook to comply with the rules of internal labour regulations;
 with the executor, whose services are related to the storage or maintenance of tangible assets,
entered into an agreement on full liability, issued an order stating the amount of remuneration;
 the name of the executor is in the timesheet, and he was regularly paid wages and so on.
The conclusion of a document called an "employment agreement" does not always
indicate that the relationship between the contractor and the owner was of a civil nature.
Therefore, the civil contract on the involvement of an individual in work must have the
appropriate name defined by the Central Committee of Ukraine: "contract" or "contract for the
provision of services".
Also, it is advisable in the preamble of the contract to emphasize its civil nature and the
fact that the relationship arising from the conclusion of such an agreement is subject to
regulation by civil law. The content of the contract should not include the conditions specific
to the employment contract.
The procedure for concluding CLN contracts will look like this (Fig. 1).
At the enterprise it will be accounted for as follows: for example, a civil law agreement
was signed on February 8, 2020, with an individual K.L. Klimenko for the provision of
electrical installation services for UAH 3,000. The works were performed by February 20,
2020, in full within the stipulated period, the act of acceptance-transfer of the completed
works was signed, so the company makes the necessary calculations (Table 2).
The advantage of this method is that CLN contracts do not provide for hourly payment,
payment is made for a certain amount of work according to the act of work performed, i.e.
employees do not make sense to "cool down" at the facility, increasing their remuneration for
time worked.
The second advantage is that the CLN contracts provide for compliance with the work
schedule, which is extremely important, because the company, in turn, when concluding
contracts for work specifies the delivery date of the object and non-compliance leads to
penalties.

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 Improving the Accounting and Auditing of Payroll Calculations

Customer apply for repair work of construction

equipment

Enterprise

finds out the scope of work, which of the main No

staff is free and whether there is a need for
additional workers
Yes

employees are selected from the database, and CLN

contracts are signed with them, where the scope of work,
term and remuneration must be clearly established.

repair works are carried out and handed

over to the client for inspection

the act of performed works is signed

the company makes the necessary

calculations, deductions and issues
worked on CLN
contracts remuneration to the contractor employees worked

Figure 1 The procedure for concluding CLN contracts

Table 2 Correspondence of accounts for accounting settlements with employees under the CLN contract
Accounting Taxation
The content of the business transaction Amount, Expenses,
Dt Ct
UAH UAH
1. Accrued remuneration under the CLN contract 93 685 3000,00 3000,00
2. Collected a single social contribution (at a rate of 22%
on the actual accumulated remuneration under the
93 65/SSC 660,00 660,00
contract of a civil nature, regardless of its size, but taking
into account the maximum value of the accrual base).
3. Income tax was deducted from the remuneration under 641/ Personal
685 540,00 –
the CLN contract (18%) income tax
642/ military
4. Withheld military duty (1.5%) 631 45,00 –
duty
5. Published by K.L. Klimenko from the box office
685 301 2415,00 –
reward under the CLN contract

3.2. Accounting and Auditing of Payroll Calculations for Aparan LLC

As already mentioned, a new department was established at Aparan LLC in January, the head
of which, by prior agreement, does not receive a salary, but only a percentage of sales. There
were no sales in January and February, so nothing was charged to the manager. This is wrong
because there is a constitutionally guaranteed remuneration for work, as well as the
requirements of the Labour Code of Ukraine and the Law of Ukraine "On Remuneration of
Labour".
1. It clearly follows from the content of these regulations: the employer has no right not to
accrue and/or pay salaries to employees employed under an employment contract, in

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 Valentyna Panasyuk, Mariya Lalakulych, Erika Yuhas, Lesya Rybakova, Vitaliy Bobrivets

particular when it comes to the head of the department. In this case, there is a rule on the
minimum wage. Payment of the same less than the minimum size is admissible only at
registration of performance of labour duties in incomplete volume. It is possible to make,
depending on the company's profit, for example, bonuses to employees, but not their salaries.
Even more, an integral consequence of the accrual and payment of wages are the
corresponding accruals (withholding), payment and declaration (reporting) of personal
income tax, single contribution and military duty. The employer also has no right to evade
such fiscal obligations.
If we talk about liability for non-payment of wages to an employee hired under an
employment contract (including the director of the department), the current legislation
indicates primarily two types:
a) it is an administrative fine imposed on the head of the enterprise in the amount from 1700
UAH (Part 1 of Article 41 of the Code of Ukraine on Administrative Offenses).
b) There is a basis for imposing financial sanctions on the company:
 for violation of the established terms of payment of wages to employees for more than one
month, its payment is not in full - in three times the minimum wage established by law at the
time of detection of the violation;
 for non-compliance with the minimum state guarantees in remuneration - in ten times the
minimum wage established by law at the time of detection of the violation, for each employee
in respect of whom the violation was committed (paragraph 3.4 of Part 2 of Article 265 of the
Labour Code).
In addition, since the employer had at least one employee under an employment contract,
but it did not report on personal income tax, military duty and single contribution, in our
opinion, there are grounds for bringing the head of the company to administrative
responsibility. for the relevant violations following the requirements of the Administrative
Code, and the company itself, the supervisory authorities will apply the financial sanctions
provided by the Tax Code of Ukraine Law of Ukraine "On the collection and accounting of a
single contribution to the general mandatory state social insurance "from 08.07.10 № 24b4-
U1,
To avoid such troubles with small amounts of income, employees, including directors,
should be hired on a part-time basis with an appropriate proportional salary. After all, part-
time pay is carried out in proportion to the time worked or depending on production. The
employer, with the consent of the employee, has the right to establish part-time work by
reducing the length of the working day or the number of working days per week. It is possible
to provide even working hours lasting at least one hour a week.
To accurately organize the accounting of payroll, we propose to the company to develop
and approve at the company a schedule of primary documents for the accounting of payroll,
which could strengthen the system of internal control in the enterprise. The document flow
schedule will allow optimizing the ways of processing the primary document from the
beginning of its creation to transfer to the archive, outline the timing of the processing of
primary materials for accounting for payroll.
The document flow schedule should be a mandatory appendix to the order of the
accounting policy of the enterprise, and its use should be controlled by the chief accountant of
the enterprise. The proposed form of the schedule of document circulation of primary
documents on the accounting of remuneration at Aparan LLC given in Table 3.

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 Improving the Accounting and Auditing of Payroll Calculations

Table 3 The proposed schedule of primary accounting documents

Document Who is Documents based on Assembly Place of Storage
name composed which it is compiled period transfer location
Recordkeeping, letters
accounting Daily on accounting accounting
Timesheet of incapacity for work,
department weekdays department department
certificates
No later than the
Recruitme accounting accounting accounting
Employee statement first working
nt order department department department
day
Order of acceptance of Immediately
personal accounting accounting accounting
the employee, personal after hiring an
card department department department
data of the employee employee
As of the date of
Tariff and qualification
establishment of
Staff accounting directory of works and accounting accounting
the organization
schedule department professions, tariff grid, department department
and introduction
organizational structure
of changes
Order to When
accounting accounting accounting
transfer to Employee statement transferring an
department department department
another job employee
Three days
Leave accounting accounting accounting
Employee statement before the
order department department department
holiday
Annually no
Vacation accounting accounting accounting
Employee statement later than
schedule department department department
January 5
Order on
termination
accounting No later than the accounting accounting
of the Employee statement
department last working day department department
employme
nt contract
Settlement Three days
and before the accounting
accountant Timesheet cass
payment payment of department
statement wages
Payment The day before
accountant Settlement statement cass cass
statement the salary

As for the synthetic accounting of payroll calculations, it is conducted at the company on

account 66 "Payments to employees":
 on sub-account №661 "Payroll" reflects the accrual of wages for the current month;
 on sub-account №662 "Settlements with depositors" - wages that were not paid on time;
Having analyzed the works of leading scientists [29; 38; 49], we can not fully agree with
the proposed methods and models of analytical accounting of payroll, as each of these options
does not fully take into account the types of payments to employees made following the
current legislation of Ukraine.
To improve the model of analytical accounting of payments to employees, we propose to
enter the following sub-accounts to the account №66 "Settlements of payments to
employees", which are presented in Table 4.

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Table 4 The proposed structure of the account 66 "Calculations of employee benefits"

Subaccount Name
661 Payroll calculations
6611 Basic salary
6612 Dismissal payments
6613 Post-employment benefits
6614 Calculations for the payment of leave
662 Settlements with depositors
663 Calculations for other payments
664 Calculations of wage payments in kind
We describe the proposed analytical accounts of the first and second-order, and determine
their composition:
Basic salary – accrued salary, remuneration for work performed by established labour
standards. It is set in the form of tariff rates (salaries) and piece rates for workers and wages
for employees;
Dismissal benefits – payments to the employee, which are payable by the decision of the
company upon dismissal of the employee, or upon voluntary termination until he reaches
retirement age. These include severance pay, cash compensation for all unused days of annual
leave and the average salary for the period of employment;
Post-employment benefits – payments to an employee that is payable at the end of an
employee's work. Such benefits include: pension benefits (old-age pensions); other post-
employment benefits, post-employment life insurance and post-employment medical care;
Calculations for the payment of leave – the amount of annual and additional leave or
payment of compensation for unused leave, leave in connection with training without
separation from work;
Settlements with depositors – wages not paid on time;
Settlements for other payments – for payments related to the recognition of the employee's
income as an additional benefit;
Payroll payments in kind – the introduction of this sub-account will provide separate
analytical accounting for cash and in kind.
The use in the practice of the proposed model of analytical accounting of payroll will
improve the methodology of accounting for payments to employees; strengthen information,
control and management functions; to systematize the accrual, accounting and issuance of
benefits to employees; expand the possibilities of using accounting information in
management; increase the efficiency of interaction of different users of information and the
efficiency of analytical work.
2. In order to improve both the audit as a whole at the enterprise, in particular from the
company's payroll and to ensure control over the implementation of practical activities of
participants by applicable law, as well as accounting policies and internal procedures,
systematic analysis and evaluation each participant in general, assessing the effectiveness of
the management system, timeliness, accuracy, completeness and accuracy of the primary and
other activities in the reporting, will provide Asset protection, we propose to create an internal
audit service.
The internal audit auditor must be an independent staff member in the structure of the
enterprise. Because the level of organization of the independence of the internal audit service
directly affects the objectivity of internal auditors.
The purpose of the audit of payroll is to establish compliance with the method of
accounting for payroll transactions per the current legislation of Ukraine, to identify errors or

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 Improving the Accounting and Auditing of Payroll Calculations

violations, the degree of their impact on the reliability of financial statements to express an
independent audit opinion on the safety of accounting on wages.
The general plan of the audit of operations on payment of work and settlements with the
personnel of the enterprise includes:
 audit of registration of primary documents;
 audit of the payroll system;
 audit of the validity of deductions from wages and benefits;
 audit of the identity of accounting indicators and accounting registers;
 audit of calculations of withheld and accrued taxes and fees.
The working document of the Program of the audit of calculations on payment of work
can look as follows (Fig. 2).

Audit Program for Calculation of Payments

Enterprise Aparan LLC
establishing compliance of the applied methodology of accounting for
Task
remuneration operations with the current legislation of Ukraine
Audit period 10-30/01/2020
N. List of audit procedures Contractor Index Notes
1 Conducting an internal control test
Existence of a collective agreement, provisions on the remuneration of
2 labour, regulations on vacations, regulations on bonuses, internal
regulations, job descriptions, etc.
Availability of personnel documents:
– orders on admission, dismissal, granting leave
– timesheets
3
– staff list (for hourly pay)
– orders and prices (for piecework payment)
– contracts of civil law nature
Checking the availability of employment records, employment records.
4
books
Checking the correctness of the calculation of wages for salaries, checking
5
the fact charges by orders, timesheets and other documents
Checking the schedule of vacations, vacation orders, the correctness of the
calculations of the days of proper vacation and accrual of vacations,
6
compensation for unused vacation. Checking the legitimacy of additional
leave. Creating a reserve to pay for vacations.
Checking the availability of sick leaves and the adequacy of their
7 completion, the calculation of temporary disability benefits, maternity
benefits
8 Checking the correctness of wage indexation
Checking the validity of the award and the availability of orders for their
9
award
10 Checking the correctness of the content of the writs of execution
Checking compliance with the current legislation of accruals and
11
deductions, contributions and fees to the State Pension Fund.
Checking the completeness and timeliness of transfers of contributions and
12
fees to the State Pension Fund
13 Checking the timeliness of payment of wages
Comparison of the amounts reflected in the fin. reporting, with the balance
14
in the accounting registers and in the General Ledger
15 Compiling a list of detected errors and violations
Date ________
Auditor_____________________________ /_______________/
Checked: The head of the working group__________ /________/ Date _______
Figure 2 Proposed program of auditing of payroll calculations

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 Valentyna Panasyuk, Mariya Lalakulych, Erika Yuhas, Lesya Rybakova, Vitaliy Bobrivets

This Program lists not only the main audit procedures for verifying payroll calculations
for the average enterprise, but also takes into account the specifics of payroll accounting in an
industrial enterprise, but in the process of auditing, the Program can always be finalized.
The implementation of the planned procedures in the audit should be carried out
systematically in a specific sequence, which is defined as the audit process and is
conditionally divided into stages.
To develop an effective audit approach to audit at the planning stage is necessary not only
to develop and document an overall audit plan and program, but also to assess audit risk,
having previously collected the minimum necessary information to understand and evaluate
accounting and control systems. When auditing employee benefits, special attention should be
paid to assessing the risk of control and its components. This is due to the high probability of
errors in the accounting system due to lack of understanding of legislation governing labour
relations, employee income tax and payroll and their ambiguous interpretation, violation of
paperwork, processing large amounts of information that causes arithmetic errors.
Thus, considering the issue of improving the audit of payroll in the enterprises, we can
conclude that today one of the urgent needs is to hire an internal auditor in the enterprise,
which will significantly improve the organization of accounting for payroll and eliminate
existing shortcomings. This will increase the information potential, provide knowledge of all
the intricacies of the activity and, in turn, greater responsibility for the recommendations
provided.

4. CONCLUSION
Thus, the proposed recommendations can help the company to streamline and improve
accounting and introduce an audit of payments to employees, save the company financial
resources because the identified violations are quite severe and will lead to penalties for
inspection. Thus, the effectiveness of the proposed recommendations ranges from UAH 4,723
to UAH 47,230 and more.
The conducted researches allow making a basis for further improvement of questions on
the account and audit of calculations with employees of "Techinmash" PJSC (Ternopil) and
"Aparan" LLC (Uzhhorod). A promising area for improving the accounting of payments to
employees is the further improvement of analytical accounting, consistency of financial
reporting of costs under International Accounting Standards.

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