The document outlines a payroll audit program designed by Esther Mingel for Cahya Mata Sarawak Berhad. It includes a basic payroll process overview, audit objectives to ensure integrity of payroll transactions, criteria for accurate employee and salary data recording, potential risks to controls, applicable control procedures, control objectives, planned audit testing, and recommendations. The program aims to audit the payroll system, controls, and transactions for compliance with policies and protection from unauthorized changes or fraudulent distribution.

1. Design of Payroll Audit Program
Prepared By Esther Mingel
May 2013

2. Outline
For Group Internal Audit, Cahya Mata Sarawak Berhad
Page Number:
Part 1 : Basic Payroll Process 1
Part 2 : Payroll Audit
* Objective 2
* Criteria 3
Part 3 : Design of Payroll Audit Program 4-10
Part 4 : Recommendations 11

3. Basic Payroll Process
1. Update
master payroll
file
2.Update tax
rates and
deductions
3. Validate time
and attendance
data
4. Prepare
payroll
5. Disburse
payroll
For Group Internal Audit, Cahya Mata Sarawak Berhad 1

4. Audit Objective
 To provide reasonable assurance that
adequate and effective controls are in
place to ascertain the integrity of pay
transactions.
For Group Internal Audit, Cahya Mata Sarawak Berhad 2

5. Audit Criteria
 Employee data are correct and accurate.
 Validation of authorization to initiate the transaction.
 Company complies with relevant policies.
 Salary data are properly recorded and reported.
 Salaried employees are paid in accordance with terms and
conditions of employment and collective agreements.
For Group Internal Audit, Cahya Mata Sarawak Berhad 3

6. Payroll Audit Program
Identify
Potential
Risks
Applicable
Control
Procedures
Audit Testing
Fieldwork
-audit
evidence
Preliminary
drafting of
issue
Audit
Program
For Group Internal Audit, Cahya Mata Sarawak Berhad 4

7. Potential Risks
Unauthorized changes to
payroll master file
Payroll changes are not
entered in a timely manner
Inaccurate processing of
payroll
Theft or fraudulent
distribution of paychecks
For Group Internal Audit, Cahya Mata Sarawak Berhad 5

8. Applicable Control Procedures
 Thorough documentation
 Segregation of duties
 Batch totals
 Direct deposit
 Paycheck distribution by someone independent of
payroll process
For Group Internal Audit, Cahya Mata Sarawak Berhad 6

9. Control Objectives
1. Development of computer applications
2. Prevention or detection of unauthorized
changes to programs
3. Controls to ensure continuity of the
operations
General IT
control
For Group Internal Audit, Cahya Mata Sarawak Berhad
Control Objectives
7

10. Cont…
Control Objectives
4.Payroll transactions are properly authorized
5.Recorded payroll transactions are valid
6. Authorized payroll transactions are recorded
7. Payroll transactions are accurately recorded
8. Applicable federal and state law, regarding remittance
of taxes and filling of payroll and HR dept reports are met
Control over
inputs;
Completeness
, Accuracy
and
Authorization
Control over
the master
file
For Group Internal Audit, Cahya Mata Sarawak Berhad 8

11. Cont…
Control Objectives
9. Assets (cash and data) are safeguarded from
loss or theft
10.Payroll cycle activities are performed
efficiently and effectivelyControl over
processing
For Group Internal Audit, Cahya Mata Sarawak Berhad 9

12. Audit Testing
Types of tests
included
Test of
controls
Substantive
test of
transactions
Analytical
Procedures
Test of detail
of balances
For Group Internal Audit, Cahya Mata Sarawak Berhad 10

13. Recommendations
 Bank reconciliation
 Documented the payroll process
 Identify any segregation of duties conflict
 Good system (password and log in details)
 Trust issue
For Group Internal Audit, Cahya Mata Sarawak Berhad 11

14. For Group Internal Audit, Cahya Mata Sarawak Berhad 12

15. Disclaimer: This presentation is not copyright protected. Therefore, you may copy at will.
The End
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16. estherm@hq.cmsb.my
Disclaimer: This presentation is not copyright protected. Therefore, you may copy at will.
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