In: Accounting
Bell, CPA, was engaged to audit the financial statements of Kent Company, a continuing audit client. Bell is about to audit Kent’s payroll transactions. Kent uses an in-house payroll department to compute payroll data and prepare and distribute payroll checks.
During the planning process, Bell determined that the inherent risk of overstatement of payroll expense is high. In addition, Bell obtained an understanding of the internal control structure and assessed control risk at the maximum level for payroll-related assertions.
Required:
Describe the audit procedures Bell should consider performing in the audit of Kent’s payroll transactions to address the risk of overstatement. Do not discuss Kent’s internal control structure. (AICPA adapted)
Please, type the answer in clear order
ANSWER:
Select the payroll register for a specific period: and check the following details:
• check the mathematical correctness of the payroll schedule, whether the account in payroll are
exactly right.
• conclude whether the payrolls are accepted by the organization.
• competition the whole of the payroll schedule with the sum of ledger explanation.
Observe the distribution of payroll check by testing the following details:
• analysis the organization of payroll contract by review the plan of financial records.
• make sure whether all the payroll check are accredited to the individual balance sheet.
• appraisal the separation of duty of payroll function.
• appraisal the secretarial for available salary and pay.
4. Test the disclosure of payroll information.
• evaluation the revelation of payroll liability in the monetary declaration.• appraisal the proper categorization of lasting and temporary liability in the monetary declaration. After analyze all the higher than details, Mr. M would be able to identify where the risk of overstatement of payroll transaction exists and the reason of the said overstatement.