Essential Audit Objectives for Payroll Audits
Payroll expense refers to the total of all the compensation that a company should pay its workers on a certain date or for a specific timeframe. Payroll (Also see Reasons to Outsource Your Payroll) is among the highest expenses that a company incurs, and hence, it is an essential area for audits. No matter what type of audit (Also see Types of Audit – Compliance Audit) the auditors from audit firms in Singapore are performing, their purposes are the same, that is, to ensure that the sums the financial statements (Also see Accounting – 4 Things about Financial Statements Every Business Owner Should Know) are showing reflect the true and fair condition of the business in that specific fiscal year. There are also numerous accounting firms in Singapore that can preserve your accounting records according to the auditors‘ demands.
Occurrence and Existence
A payroll audit (Also see Outsourcing Accounting and Payroll Functions) aims to ensure the existence of payments and whether the company is paying its genuine employees. The auditors may achieve this by identifying if the company is implementing proper controls over its payroll. If the company is correctly delegating the duties concerning payroll, it may make sure that no one can make up a false worker and authorise salary payment to himself.
Completeness
As the payroll involve a considerable sum, the company needs to make sure that it has included the amounts it pays to its workers in the total amount of payroll. The amount should include wages of permanent employees, overtime of workers, salaries of temporary workers, as well as other benefits like housing allowance and medical coverage. The auditors should also ask the management if they found out any outstanding amount and ask them for the reasons why the amounts are still unpaid.
Accuracy
The auditors need to make sure that the calculation of the deductions and benefits in the payroll are correct. To examine this, they may select some workers through random sampling and recalculate the deductions and benefits in their payroll. They can also review the timecards to make sure that the company has calculated the pay for work done accurately. The management should approve any adjustment in the employees’ basic salaries and make sure that the personnel responsible for payroll has done the calculation correctly. Besides, the auditors need to assess the documents which prove that the management has reviewed the payroll.
Presentation and Disclosure
When a financial reporting period has ended, a company should present its payroll expenses in its income statement. If it shows its payroll expenses accurately, it may ensure that the representation of payroll expense is true and fair. On the other hand, disclosures of any uncommon amounts are crucial in telling the management how and why the company paid for the amounts. In payroll audits, the auditors will examine if the company has accurately presented the payroll expenses and whether it has disclosed the unusual amounts in the notes to financial statements if there is any.