Payroll / salaries and wages

Normally there should not be many appointments and terminations, consequently audit work should concentrate on the maintenance of employees and payments of salaries and wages.

Transaction life cycle

Risk Potential Control Assertion Addressed

Audit test to be Performed

Appointment of personnel

Ghost employees are included in the personnel system

Letter of appointment and personnel file (including copies of certificates)

Feedback from supervisor to administration to confirm the individual has commenced employment.

Existence Tests of control:

For a sample of new employees obtain the personnel files. Inspect required supporting documents for appointments, including information on the selection committee and signed letter of appointment.

Evaluate whether the position has been filled in a timely manner.

Payments of salaries

Salaries maybe paid in duplicate, to persons who are not on the payroll and at incorrect amounts.

Any amendments to standing salary information (or salary master file) should be properly authorized.

Access to standing salary information should be restricted to authorized personnel.

Measurement, Accuracy

Tests of control:

For a sample of changes made to standing salary information (for example salary increases), confirm that changes were appropriately authorized.

Substantive tests:

For a sample of changes made to standing salary information, inspect supporting documents and confirm the validity of changes affected.

Salaries are paid at correct amounts

Completeness, Occurrence

Tests of control:

For selected payroll runs inspect proof that: The payroll information has been authorised

by an official independent of payroll processing.

Line managers have confirmed the payroll details for their own departments.

In

Transaction life cycle

Risk Potential Control Assertion Addressed

Audit test to be Performed

spect proof that there is regular and independent reconciliations are performed between the payroll and the financial system.

The employee records kept by line managers are independently and regularly reconciled to the HR department’s records (at least twice annually). Substantive tests:

For a sample of employee payments recorded in the ledger: Compare the basic salary included to the

approved salary schedule. Verify that valid supporting documents exist

for all additional salary inputs including overtime payments, leave pay, incentives, bursaries, travel claims, subsistence claims, loan repayments, garnishee orders, etc.

Confirm that all additional salary inputs are properly authorised by the line manager before the payroll run.

Confirm that salary deductions have been properly calculated

Statutory payments have been appropriately made.

Recalculate salary amounts.

For a sample of employees on the payroll physically verify the existence of the employees. Where this procedure is not practical, confirm whether that the selected employee(s) had take leave during the past year. Where no leave transactions have been noted further follow-up may be necessary to verify the existence of the employee.

Transaction life cycle

Risk Potential Control Assertion Addressed

Audit test to be Performed

Termination of employment

Terminated, retired employees are paid after finishing service

System verification of all staff over retirement age

Policies to ensure non attendance is taken up by the supervisor

Standard procedures for informing personnel to inform finance

Validity Substantive tests:

For a sample of terminations examine personnel files and determine whether: The termination was processed within a

reasonable time or at least before the next payment of salaries.

The file represents reasonable documentation including leave application, sick sheets, promotion information, training requirements, etc.

Inspect documentation to confirm that the employee was excluded from the subsequent salary run.