8/9/2019 AUDIT OF PAYROL AND PERSONNEL CYLE

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THE AUDIT OF WAGES

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1. Identify controls that should be in place to ensure that f ictitious employees are not included on

he payroll.

Blank starters and leavers forms should be kept in the HR department and completed when notified by the appropriatesenior responsible official of staff changes.

Staff implementing these changes should not be involved in the preparation of the payroll or the distribution of pay-

packets.

Periodic independent checks should be performed from the payroll to contracts of employment maintained in the HR

department.

2. List FOUR control objectives of a wages system.

Any four of the following:

To ensure that employees are only paid for work done

To ensure that wages are only paid to valid employees

To ensure that all wages are authorised

To ensure that wages are paid at the correct rates of pay

To ensure that wages are correctly calculated

To ensure all wages transactions are correctly recorded in the books of account

To ensure that all payroll deductions are paid over to appropriate third parties

3. Explain the difference between internal control questions (sometimes referred to as criteria

questions) and internal control evaluation questions (sometimes referred to as key questions).

Illustrate your answer by identifying TWO examples of wage system ICEs and TWO relevant ICQs

or each ICE.

ICQs ask detailed questions about the wages system in order to identify if specific controls exist. They

are objective questions requiring a simple yes or no answer and form the criteria for answering ICE

questions.

ICEs are normally answered using knowledge of the system obtained f rom the ICQs and evaluate

whether sufficient controls exist to prevent the specified error or omission. They are subjective and

require the exercise of judgment.

1.ICECan employees be paid for work not done?

ICQs

(i) Are clocking on points supervised?

(ii) Are clock cards reviewed by a responsible official before being forwarded to the wages department?

2.ICECan wages be paid to fictitious employees?

ICQs

(i) Who is responsible for the control and issue of blank clock cards?

(ii) Are periodic checks made from the payroll master file to HR records?

4. Explain the difference between an error report and an exception report.

Error report

If invalid data is input for example, an employee number is entered that does not exist, it should be

rejected by the data validation controls and will be included on an error report. Items on the error report

need to be corrected and re-input.

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Last updated: 23 Sep 2014

Exception report

If data is input which exceeds certain pre-determined criteria for example, employees earning greater

han $2,000 per week, it will be processed but included on an exception report. Items on the exception

report should be independently checked to supporting evidence as they could indicate fraud or error.

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Page 2 of 2The audit of wages | Students | ACCA | ACCA Global

1/19/2015http://www.accaglobal.com/ca/en/student/acca-qual-student-journey/qual-resource/acca-qu...