How to test for completeness of payroll expense?
Assuming that the payroll register reconciles with the payroll expense balance in the income statement, then the audit team needs to verify the completeness of the payroll report. This can be a tough test as its difficult to verify that all employee time was recorded.
One test the audit team can perform is to sample time sheets and verify that the time sheet was recorded in the payroll report. If certain time sheets are missing from the payroll report, then the payroll report might not be complete.
You might also be interested in...
What duties should be segregated in the payroll cycle?
The company should segregate human resources, payroll accounting, and the treasurer. Each role is responsible for the following: 1) Human resources – This can be performed by the human resources department hiring new employees and maintaining records of the employees hire date and salary information. 2) Payroll (accounting) – Supervision can be assured by proper […]
What type of audit evidence is available for the payroll cycle?
When testing internal controls that have been designed and implemented by management as it relates to the payroll department, the internally developed documentation represents the source documentation that will become subsequently tested by the independent auditor in order to obtain relevant audit evidence. Some of the information that is available to the audit team includes: