Payroll

Question 1

What are the assertions for income statement elements?

Answer 1

1) Accuracy-$
2) Occurence- Valid?
3) Completeness- omission?
4) Cutoff- Redundant
5) classification- Correct account?

Question 2

How are income statement elements primarily tested (substantive test)?

Answer 2

Analytical Procedures

Test of details are not usually tested unless analytical procedures indicate that there is a misstatement

Question 3

How would you test occurence and accuracy?

Answer 3

Examine personnel records on a test basis

Trace selected transactions from the payroll register to the general ledger and bank account

Question 4

How could the auditor test completeness?

Answer 4

• Review time reports

- Use analytical procedures to evaluate the reasonableness of year end accruals for payroll

Question 5

How would you test cutoff?

Answer 5

Not separately tested. Usually captured when you complete occurence and completeness.

Question 6

How would you test classification?

Answer 6

Verify payroll deductions and taxes

Trace cash disbursements for withholdings to appropriate agencies