Question

As an internal auditor, you have been assigned to evaluate the controls and operation of a computer payroll system. To test the computer systems and programs, you submit independently created test transactions with regular data in a normal production run.

What would be transactions in a payroll system?

What is this audit technique called?

List advantages and disadvantages of this technique.

Give at least one other concurrent audit technique and how it could be applied specifically to the cycle your group was assigned to develop for the class project.

Answer 1

Ans 1 . Payroll system manage everything having to do with the process of paying employees and filling employment taxes . They are put in place to keep track of worked hours calculating , wages withholding taxes and other deduction printing and delivering checks and paying government employment taxes

Ans 2. Concurrent audit

Ans 3 . Advantages and Disadvantages

• Advantages

1. The auditor can give useful suggestions to the management about the financial aspect, which can be implemented in the current period itself.
2. The books can be extensively checked and mistakes can be rectified then and there.
3. The books are verified throughout the year, therefore accounts can be finalized immediately after the end of the financial year and statements of accounts can be presented to the shareholders, immediately thereafter.

• Disadvantages

1. Continuous audit involves heavy expenditure. The management has to pay high fees to the auditor, as the audit is performed throughout the year.
2. The auditor may not verify again the accounts relating to the period for which the verification is conducted earlier. A person who has access to the accounts may be tempted to tamper the accounts which are already verified.
3. The staff belonging to the client’s office might become careless in their work and excessively rely on the audit staff to find mistakes and errors in accounts.