Question

Lists 3 payroll department objectives that would be relevant to this audit. 2. Lists at least 2 potential risks associated with each objective in step 1. 3. Lists at least 2 controls that might be in place to mitigate each risk identified in Step 2. 4. Reflects your test plan (i.e. the test steps you would take) to determine if the controls in Step 3 are in place and functioning as intended.

Answer 1

Payroll department objectives:

1. Proper withholding of taxes and documentation.

2. Employee reference checks and background verification before hiring.

3. Pay packages of all the employees should be clear and documented.

Potential risks are:

1. Inappropriate withholding of taxes.

2. Withhold taxes not submitted to the goverment.

3. No background verification.

4. Fraudulent activities of employees.

5. Inappropriate pay packages according to the band's of the employees.

6. Hiring discrimination.

7. Remuneration concealed and not documented.

Controls:

1. Withheld taxes should be handed over to the goverment and documented.

2. Appropriate returns should be filed.

3. Screening of employees.

4. Necessary background checks of the ethical behaviour of employees.

5. Remuneration should be detailed and disclosed to the bosses.

6. Manager's remuneration should be disclosed in annual report.

Test plan:

1. Check the documentation via random sampling.

2. Check wether appropriate returns have been filed or not.

3. Random sampling of the background checks of employees.

4. Observing the unethical employees closely.

5. Stress testing the controls place to know wether they are functioning as intended.

6. Remuneration clarity should be checked.

7. Reimbursement of expenses should be checked for genuineness.