Audit of Payroll
Hiring employees >>> Authorizing payroll changes >>> Preparing attendance and timekeeping
data >>> Preparing the payroll >>> Recording payroll >>> Pay-outs
Test of Control
Functions
Hiring employees
Authorizing payroll changes
Preparing attendance and
timekeeping data
Preparing the payroll
Recording payroll
Pay-outs
Potential misstatements
The payroll may include
fictitious employees
Unauthorized change in
salary rate may occur
Terminated employee may
remain in the payroll register
Payroll overpaid for hours not Use proper electronic system
worked
Loss of data during
submission to payroll
department
Invalid data may be included
in the payroll data
Errors occur in processing
and recording the payroll
Unauthorized changes were
made to the payroll data
Checks issued for
unauthorized employees
Control procedures
Hiring a new employee and
firing an employee must be
authorized by appropriate
personnel in the HR
department
Only authorized personnel
can change the data in the
payroll system
The HR department should
notify the payroll department
of the terminations
immediately
to capture hours worked and
approved by authorized
personnel
Use of computerized payroll
system with appropriate
application controls
Independent check on the
payroll data and only
authorized personnel can
change the data
Exception and control report
to be investigated by
authorized personnel
Control total of payroll
register are checked against
total amount of payroll
journals
Identification of employees
on distribution of cheques