Lecture Notes Ch. 20 & 22 (ACCT-422)

Lecture Notes Ch. 20 & 22 (ACCT-422) - Chapter 20...

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Chapter 20 Audit of the Payroll Cycle and Personnel Cycle The Payroll and Personnel cycle involves the employment of personnel to perform services, the payment of those employees, the withholding of taxes and other deductions, and the payment of withheld and accrued taxes and benefits. There are several accounts affected by the Payroll and Personnel cycle as shown in Fig. 20-1. The business functions and documents and accounting records associated with the Payroll and Personnel cycle are discussed on pages 661 – 664 of the text. Table 20-1 on page 662 is a good summary of the class of transactions (payroll is the only class for the Payroll and Personnel cycle), accounts, business functions, source documents, and accounting records for the Payroll and Personnel cycle. Fig. 20-2 on page 673 illustrates the same methodology for designing tests of controls and substantive tests of transactions as set forth for the Sales and Collection cycle. Table 20-2 on page 666 provides a good summary of the transaction-related audit objectives, key internal controls, common tests of controls and tests of transactions for the Payroll and Personnel cycle. As with every cycle, it is important to have adequate separation of duties for the Payroll and Personnel cycle. To reduce the risks associated with the Payroll cycle (the overpayment of personnel or payments to nonexistent employees), the authorization functions, such as approval of hiring and firing and pay rates, should be separate from the payroll functions. Likewise, the custody function (signing checks) should be handled by
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This note was uploaded on 04/11/2010 for the course ACCT 422 taught by Professor Blake during the Spring '10 term at MD University College.

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Lecture Notes Ch. 20 & 22 (ACCT-422) - Chapter 20...

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