audit schedule

ABC SERVICE AGENCY AUDIT OF OVERTIME WORKED

AUDIT PROGRAM

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Overall Internal Audit Schedule and Assignments

Activities Apr May Jun Jul Aug Sep

1. Notification

a. Send a letter to the auditee of the schedule of the upcoming audit.

b. Provide the auditee list of documents (organizational charts, financial statements, payroll forms, manuals) that will be needed to plan the audit.

2. Planning

a. Plan the review by conducting series of meetings with auditing team

b. Conduct an engagement risk assessment

c. Draft the audit plan

d. Schedule the opening meeting

3. Opening Meeting

a. Discuss the following with senior management and staff:

i. Scope of Audit

ii. Process to undertake

iii. Areas of concern by the management

iv. Time frame of the audit

v. Schedule of the employees that must be consulted and potential timing issues like vacations, deadlines


AUDIT PROGRAM

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b. Finalize the audit plan Apr May Jun Jul Aug Sep

4. Fieldwork

Payroll Processing

a) Document the flow of documents through payroll processing. (From receiving time reports to printing final checks and pay stubs.)

b) Payroll procedures should be reviewed for appropriate controls to ensure the accuracy of salary payments. Verify the following:

i) Signatures of employees preparing salary payment calculations and the supervisor reviewing the same.

ii) Ensure that file copies of Employee Statements of Earnings and Payroll Registers are maintained in the custody of the Payroll Department personnel.

iii) Determine that all computer/manual payroll registers are reviewed to ensure that the information has been accurately calculated and entered into the PR system.

c) Select a sample of individuals from the last payroll register of the audit period and perform the following:

i) Trace the pay rate and all deductions to properly authorized forms in the employees personnel file.

ii) Agree departmental classifications in payroll and verify against personnel records.

iii) Trace any overtime or supplemental pay to properly approved forms. If time cards are used in the calculation of gross pay, determine that the rate has been properly calculated, approved, and filed.

iv) Recalculate all amounts, including gross pay, deductions, stipends, and net pay. Trace elective deductions to signed authorization forms and reference taxes to appropriate sources.

v) Trace disbursement to appropriate employee.

vi) Trace total payroll amounts to posting in the proper general ledger accounts.

d) Document controls for protection and distribution of payroll checks. Conclude on adequacy.

Hourly/Daily Rate Employees


AUDIT PROGRAM

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a. Obtain a list of individuals that were hourly/daily rate employees the during the audit period. From this list select a

sample of 25 employees for testing. Then obtain time sheets for these 25 employees for the following pay dates:

12/15/10, 4/30/10, 6/30/10 and 10/1/10 in order to test the following. Do for the rest of the years.

Apr May Jun Jul Aug Sep

i. Gross pay recalculated, ties to what was actually paid.

ii. Time sheet hours properly add up and agree to employees regular work schedule.

iii. Any OT or Supplemental Pay was approved in advance, necessary and properly recorded and calculated.

iii. Noted appropriate approval on time sheet.

Overtime Test

a. Obtain a report that lists all employees that had overtime pay for the payrolls run during the audit period and 2 pay

periods after financial year-end. Then verify the following:

i. Verify that only 150% was calculated by departments payroll clerk.

ii. Verify that only 150% was entered by Payroll in order to calculate time and a half.

iii. Verify that correct base salary was used in calculation.

iv. Verify that OT was actually due based on hours worked and ABC Policies and Procedures.

Reconciliations

a) Obtain the reconciliations of all payroll-related deposit accounts and payroll-related liability accounts. Trace balances to the general ledger, bank statements, and supporting documentation. Test transactions as necessary. Verify the accuracy of the reconciliation and the propriety of any outstanding items.

b) Evaluate reconciliations to ensure that business standards are implemented, including:

i) Reconciliation is prepared within thirty days of the end of the period.

ii) The account title and account numbers are documented.


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iii) The general ledger date is documented. Apr May Jun Jul Aug Sep

iv) The reconciliation balance ties to the general ledger ending balance.

v) Signature of the preparer and the reviewer as well as the respective dates are documented.

vi) Descriptions of outstanding items are adequate and explicit.

vii) Origination dates of outstanding items are clearly documented.

viii) Reconciling items are cleared within sixty days.

ix) Backup documentation, including general ledger pages, reports, etc. are attached.

x) The reconciliation is clear and able to be reasonably understood by individuals not involved in its preparation.

c) Examine in detail the contents of the most recent bank statement. Ensure that all checks carry the appropriate signatures and verify the propriety of the endorsement. Compare dates on the deposit slips to the date the deposits were recorded by the bank to ensure that deposits are being promptly processed.

Custody of Payroll Records

a. Ensure that access to payroll records is limited to authorized employees only. Determine whether files are consistently safeguarded during and after business hours.

b. Determine that blank check stock is adequately safeguarded. Inventory the supply of blank payroll checks and determine the first number on the supply of checks is in sequence with the last one issued.

Miscellaneous

1. Wage Form

a. Determine the employees in the Payroll and other related departments who have access to change pay rates.

Document that selection and review their pay for the pertinent calendar year and compare to the Wage form for gross pay,

federally taxable salary and withholding.

b. Verify that OT/Supplemental Pay is recorded on their W-2


AUDIT PROGRAM

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2. Salaries Apr May Jun Jul Aug Sep

a. Obtain a listing of employees who have received pays during the financial year. Determine that the proper documentation is on file

b. Ensure that employees do not receive both a stipend and OT/Supplemental pay for the same work.

3. Payroll changes

a. Document the process of payroll changes the add OT/Supplemental pay. Select a random sample of recent payroll changes and determine that proper authorization is on file.

b. Determine if there are any other areas that should be reviewed and test as necessary.

5. Communication

a. The audit team should consistently be in contact with the auditee to clarify processes, gain access to documents and clarify procedures.

6. Report Drafting

a. Draft the report. This would consists of several sections and includes:

i. Distribution list

ii. Follow-up date

iii. General overview of audit unit

iv. Scope of the audit

v. Any major audit concerns

vi. Overall conclusion

vii. Detailed commentary describing the findings and recommended solutions

b. Communicate the draft with the audit unit for review. And if there is any mistake found in the draft, the auditor will be informed right away so that it can be corrected before the final report is issued.


AUDIT PROGRAM

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7. Management Response Apr May Jun Jul Aug Sep

a. Management will be requested to answer the report by stating whether they agree with the problems cited, the plan to correct noted problem and the expected date by which all issues will have been addressed.

8. Closing Meeting

a. A closing meeting will be held so that everyone can discuss the audit report and review the management responses. This is an opportunity to discuss how the audit went and any remaining issues.

9. Final Report Distribution

a. Final audit report will be sent to appropriate officials inside and outside the audit area

b. An audit survey will also be distributed to the audited unit to solicit feedback about the audit

10. Follow-up

a. This will be conducted on an issue-by-issue basis and typically occur shortly after the expected completion date, so that agreed-upon corrective actions can be implemented.

b. This may include interview with staff, perform tests, or review new procedures to perform the verification.

c. A letter will be provided to the staff indicating whether they have satisfactorily corrected all problems or whether further actions are necessary.

audit schedule

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