Test of Controls for Payroll Processing discussion

Anonymous

Question Description

Mark Company's audit team is evaluating the controls that Mark has implemented over the automated processing of payroll transactions. During the understanding and assessment stages of the audit, the following processing and output controls have been identified as being important in this processing:

  1. To detect unauthorized access to payroll programs and processing, a system log is generated and reviewed on a weekly basis. This log identifies the programs that have been accessed during the past week, the individual(s) who have accessed those programs, and the time(s) during which the programs have been accessed. This log is reviewed, and any unexpected or unauthorized access is investigated immediately.
  2. Control totals are determined prior to the input of data and compared to computer-generated totals following transaction processing.
  3. Any gross pay calculations in excess of $25,000 per month are identified and written to a rejected transaction file for separate investigation because Mark's highest paid employee whose salary is processed through the system earns $300,000 per year.
  4. The system generates a report of any errors or unusual situations identified during transaction processing. This report is reviewed, and any items are resolved in a timely manner, and the resolution is documented by notations made on the report.
  5. Any changes to employee master file information since the last payroll period are evaluated to ensure that they have been properly authorized by the appropriate personnel.
  6. The output is reviewed for reasonableness prior to distribution to users.

Required:

Consider the four methods of testing the operating effectiveness of controls (inquiry, observation, document examination, and re-performance). For each of the preceding controls, provide an example of how Mark's audit team might choose to test the operating effectiveness of the control using the four methods of test of controls (e.g., how would the audit team use inquiry, observation, document examination, and re-performance to test control #1, the generation and review of the system log?). [Note: Not all types of tests of controls will be appropriate for testing all the controls.]

Imagine that you will be presenting to your audit partner on how you will conduct the audit of this section of controls. Prepare the following deliverables:

  1. a PowerPoint presentation summarizing your testing methods for each of the controls listed above and high-level advantages or limitations to such tests for that particular control, and
  2. a Word document with your talking points to support the PowerPoint slides.

Your combined documents should be at least 4 pages in length, but no more than 6 pages in length, not including the title page and reference page. Outside academic resources not required, but they would likely assist with your analysis. If they are used, citations must be provided.

Tutor Answer

mikewinter3
School: New York University

Attached.

1

Test of Controls for Payroll Processing

Student name:
Institutional affiliation:

2
Test of Controls for Payroll Processing
The attached word document addresses the question “Test of Controls - Payroll Processing” by
answering the following:
Imagine that you will be presenting to your audit partner on how you will conduct the audit of this
section of controls. Prepare the following deliverables:


a PowerPoint presentation summarizing your testing methods for each of the controls
listed above and high-level advantages or limitations to such tests for that particular
control, and



a Word document with your talking points to support the PowerPoint slides.


1

Running Head: Test of Controls for Payroll Processing

Test of Controls for Payroll Processing

Student name:
Institutional affiliation:

2

Test of Controls for Payroll Processing
Test of Controls for Payroll Processing
Introduction
The auditing process involves the official inception of accounts belonging to a company or
organization, and the process initiated by an independent organization or function. There are four
various methods use by auditors to test the controls operating effectiveness of an organization. The
methods include re-performance, document examination, observation and enquiry. Through these
methods, the auditor is able to draw the conclusion for an audit process. In this case, of Mark
Company, the audit process aims at evaluating the controls implemented by Mark regarding the
automated transaction for the payroll system.
Auditing the automated payroll transactions of Mark Company involves a stepwise process as
follows:
Inquiry:
This method involves the auditor asking appropriate staff and management regarding relevant
applicable controls in their working environment. For example, the auditor can inquire of from the
management if login into the payroll system are monitored every time even when the auditor is
not access to the onsite activity. This method is applicable for the following output control:


Determining control totals from the input of data and make a comparison with computergenerated report outputs.



Identifying gross pay calculations exceeding $25,000 on a monthly since no employee at
Mark Company earns more than $300,000 annually.

3

Test of Controls for Payroll Processing
The first step involves audito...

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Anonymous
Return customer, been using sp for a good two years now.

Anonymous
Thanks as always for the good work!

Anonymous
Excellent job

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