COMMERCE 4AD3 Lecture Notes - Cost Accounting, Audit Risk
26 Nov 2012
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Document Summary
Proper segregation involves authorization by persons who do not have payroll preparation, paycheque distribution or reconciliation duties. Auditors can perform control tests to determine whether controls that are said to be in place and operating actually are being performed by company personnel. Dual direct of control tests: one direction is in regards to completeness (matches personnel file content to payroll department files and the payroll register). The other direction is the test of validity. The control performance of interest here is the preparation of the payroll register. Generalized audit software can be used to test controls in the payroll process. The reliability of internal management reports and analyses is a major portion of the substantive audit of payroll, compensation costs, and labour costs assigned to inventory and cost of goods sold.
