Question
The following information pertaining to payroll was provided to the audit team by the CFO: Soft Touch Limited (STL) has 200 employees spread across 10
The following information pertaining to payroll was provided to the audit team by the CFO: Soft Touch Limited (STL) has 200 employees spread across 10 departments. Casual employees are paid on an hourly basis, while permanent employees earn a fixed base salary per year. Hence, for ordinary hours, casual employees are paid for the number of ordinary hours they work multiplied by their salary rate, while permanent employees get the fortnightly portion of their annual salary. Payroll is processed on a weekly basis for casual employees. Permanent employees have their wages calculated fortnightly and paid during the second week of the month. The standard ordinary hours per week is 40 hours, any time over the normal hours is considered overtime and paid 1.5 times the normal rate. However, only casual employees are paid overtime. Pay as you go taxes are deducted at a flat rate of 30% (Note: assume the flat tax rate is correct ignoring the actual progressive tax system in Australia).2 All employees (i.e. both permanent and casual) are required to "clock on" when they arrive for work and "clock off" when they have completed their shift. The timesheets are signed by the head of the respective departments before submitting to the payroll department. All salary payments are made by bank transfer. To understand the payroll process better, your audit manager randomly selected a summary report of the payroll for the second week of May from 8th to 14th May. The total payroll expense was $245,258.51 for that period. You should prepare a document that: i. Explains the main assertions at risk for payroll. ii. Outlines one (1) common substantive procedure for each of the assertions above. iii. Examines whether payroll has been mentioned as a Key Audit Matter (KAM) in auditors' reports of all ASX listed entities in 2021 (see report on CloudDeakin). Explain why you think this is so. iv. Discusses eight (8) audit procedures you would use to audit the payroll expense for the month of June
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