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Summary Payroll substantive procedures.
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This document provides a summary of the substantive procedures for each and every assertion affecting the payroll cycle.
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AUI2601 Assignment 1 Semester 1 2023
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Payroll CycleAssertion Payroll (COT)
Accuracy Confirm that the gross salary used in the payroll is
authorised in terms of company’s remuneration policies
and signed salary notifications in the employee’s
personnel file.
Trace any additional (bonuses) amounts paid to the
employee to source documentation and inspect the
source documentation for a valid authorising signature,
e.g. the financial director approving the payment of an
incentive bonus.
Inspect any overtime reports signed by the foreman or
production manager for the period selected, and confirm
that the rate used for overtime complied with company
policy and labour requirements, e.g. overtime rate is
normal time and a half.
Compare all deductions, e.g. PAYE, pension, medical aid,
to the appropriate rules to confirm that the correct
amounts were deducted.
Test the casts and the arithmetical accuracy of the payroll
as appropriate
Trace amounts posted from the selected payroll to the
relevant accounts in the general ledger.
Procedures to confirm that employees on the payroll are not fictitious (Occurrence assertion)
1. Inspect the documentation in the employee’s personnel file, e.g. signed employment
contract, identity details (identity numbers can be verified on the national identity number
database), tax registration forms, etc. and agree it to the payroll.
2. Perform a positive (physical) identification of the employee where possible.
3. Enquire of senior personnel to confirm (in writing) that specified individuals are employed in
their section or division.
4. Inspect returns to outside entities for the inclusion of employees selected in the sample, e.g.
PAYE reconciliations submitted to SARS, or medical aid contribution returns.
5. Use audit software to scan the employee master file for “error conditions” which may
indicate fictitious employees, e.g.
Duplicated or missing identity numbers
Duplicated or missing tax reference numbers
Duplicated bank accounts
Duplicated staff employee numbers.
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