Describe the detailed audit works, Auditing

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Your firm has recently been appointed auditors of the Social Transport Corporation and you are commencing the audit of the wages system.

The Corporation has about 2500 employees and a computerised payroll system is used for calculating wages. All employees are paid weekly in cash. Their gross pay is based on the hours worked and overtime. Details of the hours worked are recorded on a clock card, which the employee signs when he receives his wages. Details of the hours worked and overtime are input into the computer from terminals kept at Depots, and the main computer in the Head Office calculates the gross and net pay. The personnel department is responsible for keeping records of employees, including

(a) date of appointment and leaving (if appropriate), with authorisation by a senior member of staff;

(b) specimen signature and signed contract of employment;

(c) the grade of the employee (which determines his rate of pay) and the department in which he works;

(d) details of membership of the company's pension scheme (if appropriate) and authorisation by the employee for any non-statutory deductions from wages (for example private loan and insurance payments).

You should assume that all employees are paid weekly and that there are no salaried employees.

Required

(a) Briefly explain the work you would carry out in the following stages of the wages system which are carried out prior to commencing the detailed audit tests:

• Ascertaining the systems
• Recording the systems
• Confirming the systems
• Evaluating the system

(b) List and briefly describe the audit tests you would perform to verify:

(i) the existence of employees on the payroll
(ii) the correct treatment of starters and leavers.

(c) Describe the detailed audit works you would perform on an employee's wage which is selected in the depth test.


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