![]() ![]() ![]() Perform a walkthrough of payroll to see if there are any control weaknesses. Risk of material misstatement for payroll.In this article, we will cover the following: Direct deposit payments are made (and everyone is happy). Seventh, a second person (e.g., payroll supervisor) approves the overall payroll.Įighth, the payroll department processes payments. Sixth, once the payroll period is complete, a person (e.g., department supervisor) reviews and approves the recorded time. The employee’s bank account number is entered into the system (if direct deposit is used).įifth, employees clock in and out so that time can be recorded. Third, human resources assists the new-hire with the completion of payroll forms, including tax forms and elections to purchase additional benefits such as life insurance.įourth, a payroll department employee enters the approved wage in the accounting system. Second, an authorized person (e.g., department head) hires a new employee at a specified rate (e.g., $80,000 per year). ![]() Salaried personnel are paid a standard amount each payroll, and hourly employees earn their wages based on time. Also, understand that most organizations have salaried and hourly employees. Then, payments are made at the end of this period (e.g., the Tuesday after the two-week period). To assist you in understanding how to audit payroll, let me provide you with an overview of a typical payroll process.įirst, understand that entities have payroll cycles (e.g., two weeks starting on Monday). Therefore, it is often a significant transaction area. Payroll exceeds fifty percent of total expenses in many governments, nonprofits, and small businesses. ![]()
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