Question

4) State the six specific transactions-related audit objectives as related to payroll, and for each objective, state one common test of controls that can be used to test the objective.

Audit Objective & Assertion                                                                        Test of Control

Answer 1

Answer to question

Sr. no.	Transactions-related audit objectives as related to payroll	Assertion	Test of Control
1	Assertions about Presentation and Disclosure.	Accuracy and valuation	Financial and other information relating to payroll expense and related accruals are disclosed fairly and in appropriate amounts.
2	Existing payroll transactions are recorded .	completeness	Reconcile the disbursements in the payroll journal withthe disbursements on the payroll bank statement.
3	Assertions about Account Balances at Period End.	Valuation and allocation	Payroll expense and related accruals are included in the financial statements at appropriate amounts, and any resulting valuation or allocation adjustments are appropriately recorded.
4	Payroll transactions are properly classified.	Classification	Compare classification with chart of accounts or procedures manual.
5	Payroll transactions are recorded on the correct dates .	Cutoff	Compare date on cheque with date the cheque clearedthe bank.
6	Transactions are properly included in the payroll master file and transaction files and they are properlysummarized.	posting and summarization	Test clerical accuracy by footing the payroll journal and tracing postings tothe general ledger and the payroll master file.