07 -- Internal Control—Payroll and Other Cycles

07 -- Internal Control—Payroll and Other...

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CPA AUDITING - STUDY UNIT 7 Internal Control Payroll and Other Cycles: Core Concepts A. Payroll cycle. Management is responsible for the establishment of controls to ensure proper authorization and calculation of the payroll; safeguarding of assets associated with the payment of payroll; proper distribution of the payroll; and proper accounting for the payroll transactions. 1. Relevant functions include personnel, payroll (an accounting function responsible for calculating the payroll), timekeeping, cost accounting, accounts payable, and cash disbursements. The organizational structure should separate duties and responsibilities so that an individual is not in the position both to perpetrate and conceal errors or fraud. Authorization of a transaction, recording of the transaction, and custody of assets associated with the transaction should be segregated. However, cost-benefit considerations may prevent complete separation. Compensating controls (e.g., more supervision) will then be
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This note was uploaded on 08/29/2010 for the course CBEAM AUD taught by Professor Gleim during the Spring '10 term at De La Salle Lipa.

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