CASES CASE 1 you are the internal sudit senior unug an assuranee engrment of thsytem.ntaces with the responsible for e This not been aadited for three de in the normal audit eyele. Thereare depositedl in this presented ap erneral leg pay- Xrzhas rs and, as stach, is due in the been no significant changess since the previous sudit s seperate paywell imprent processing of payeol checks. Amcumts hat is, there were no xystem changes, of personnel, and no However during the last assurance audit function identified iaternof wbich were considered significant. The signis- rsformation pertaining to employees leaving the com- Pate iag in extended delays before those employees ied several observationsoall ehecks, inehding . Certain non-payroll ihems are deducted from the pay some cant observations related to Empoyee loans to cover the cost of extra benefits o was not communicated stems rights were terminated, to the IT department, p the United Way. Hours paid to nonexempt employees were not Contributions to pelitical action committees PAC - Payroll expenses and the related payroll accruals are rted by approved timesheets. nts withbeld for employees were not consistent considered material to the company. with elections made by employees. bility existed that phantom (ghost) employees could be included in the payroll without detection Based on the above information, perform the following steps to condact a payroll assurance engagement A. Determine at least four payroll department objec- pasroll management implemented actions to address all B. Create a list of potential risk seenarios for each nt observations and the internal audit function ducted limited follow-up procedures to validate that C. Based on the identified risk scenarios, defie and tives that would be relevant to this engagement objective. assess the key payroll risks cond anned actions were completed. This is the first audit since the follow-up procedures were completed. 1. You will need to make assumptions regarding The following is pertinent information to the payroll impact and likelihood for this assessment. Docu ment the assumptions made. assurance engagement: , XYZ employs approximately 4,400 employees. 2. Also, make assumptions about and document process-level management's risk tolerance levels. Approximately 2,700 of those employees are salaried the rest are hourly D. Document a potential process flow in a detailed n Employees are paid biweekly s Hourly employees earn pay at straight time for the first flowchart. Make sure that this flowchart identifies key risks and controls and has at least one potential design inadequacy Develop potential key performance indicators for E. and a half for so hours in a biweekly pay period, time the next 20 hours in a pay period, and double time forF any hours exceeding 100 hours in a pay period. the process you documented in step D F. Identify which controls are considered key controls. As part of this analysis, document your assumptions regarding the effectiveness of entity-level controls and how such controls affect the payroll process- level controls, if at all. Link the key controls to the identified risks. r The company utilizes a widely used and market tested pasyrol ackage(PayRight) for processing G. 13-5 CONDUCTING THE ASSURANCE ENGAGEMENT