Items 1 through 9 are selected questions typically found in questionnaires used by auditors to obtain an understanding of internal control in the human resources and payroll cycle. In using the questionnaire for a client, a “yes” response to a question indicates a possible internal control, whereas a “no” indicates a potential deficiency.
1. Does an appropriate official authorize initial rates of pay and any subsequent changes in rates?
2. Are written notices documenting reasons for termination required?
3. Are formal records such as time records used for keeping time?
4. Is approval by a department head or foreperson required for all time records before they are submitted for payment?
5. Does anyone verify pay rates, overtime hours, and computations of gross payroll before direct deposits are made?
6. Do adequate means exist for identifying jobs or products, such as work orders, job numbers, or some similar identification provided to employees to ensure proper coding of time records? records?
7. Are payroll direct deposits authorized by persons independent of timekeeping?
8. Are employees required to show identification when requesting changes to their address or other personal information in company files?
9. Are authorized master file change forms used to document and implement changes in functional access rights?
REQUIRED
a. For each of the questions, identify the nature of the potential financial misstatement(s) if the control is not in effect.
b. For each of the questions, state the transaction-related audit objective(s) being fulfilled if the control is in effect.
c. For each control, list a test of control to test its effectiveness.
d. For each of the potential misstatements in part (c), list a substantive audit procedure for determining whether a material misstatement exists.