Slide 1
Good afternoon, Marie and Tess, viewers, and to our special guest Mr.
Aselo Nino Makabenta. I am Bless Geraldo Moralita, CPA from D & V Philippines.
I am here today to give you a brief discussion about the nature of payroll
transactions.
So, under this topic, we will be tackling about, of course, what payroll
transactions are, and the documents used in the payroll and personnel cycle
and their audit signature.
As we all know, A payroll audit is an analysis of a
company’s payroll processes to ensure accuracy. Payroll audits examine
things like the business’s active employees, pay rates, wages, and tax
withholdings. You should conduct a payroll audit at least once per year to
verify your process is up-to-date and legally compliant.
Generally, payroll audits are internal, meaning you or someone in your
business conducts them. Performing internal audits can help you catch errors
and prevent possible external audits later on.
Slide 2
But what are the payroll transactions? Well, these transactions involve
the events and activities relative to executive and employee compensation.
This class of transactions includes salaries of personnel, wage earners or
factory workers, sales person’s commission, bonuses of executives, payroll
taxes, pensions and profit-sharing plans and other employees’ fringe
benefits.
The primary errors or irregularities that may occur are a padded payroll
and misappropriation of unclaimed paychecks. The auditor should therefore
adopt procedures that will enable him to detect such occurrences.
Okay so let us move on to the documents used in the payroll and the
personnel cycle and their audit signature.
Slide 3
Of course, we have the TIME CARD. It is a prenumbered record for each
employee indicating the number of hours worked each day during a pay period.
Moreover, many entities use a time clock which automatically records a
starting and stopping time.
In short, it indicates number of hours worked by each employee per day
during a pay period.
This time card provides evidence about the validity of the hours an
employee is paid for working which is significant in the auditing process.
Slide 4
Next one on the list is the deduction authorization. It is a form signed
by employee authorizing the employer to deduct various optional payments from
his paycheck. So, deduction authorization indicates that the employee
authorized an amount to be withheld from a paycheck for a specific purpose
which is also very important in the auditing process.
Slide 5
Third one we have the certification of taxes withheld. It is a report
prepared annually to report the gross amount of earnings, income taxes
withheld, and SSS taxes withheld. Copies are submitted to employees for filing
with their tax returns to BIR and to other government taxing authorities as
required.
Certification of taxes withheld indicates that taxes withheld were
reported to the various taxing authorities.
Slide 6
Other documents used in payroll and personnel cycle are labor ticket and
labor ticket summary.
Labor ticket is a Pre numbered form which records time worked on a job
which records the specific activity of a laborer. While labor ticket summary
shows the summary of daily labor tickets by job or process which on the other
hand records labor used in production on any given day.
Slide 7
We also have payroll tax returns which is the form the entity files with
governmental agencies reporting wages and taxes withheld. This provides
evidence that amounts withheld have been paid to the appropriate authorities.
Slide 8 (need edit in ppt)
- Other Personnel Records
> employment applications
> reports on reference checks
> authorizations for employment
> authorization for pay or pay changes
> performance-evaluation reports
> records of sick and vacation days
Lastly for the documents are the other personnel records. This includes
employment applications and reports on reference checks which provides
evidence that employees exist, authorizations for employment which provides
evidence that employees work for the entity, authorization for pay or pay
changes which provides evidence that pay rate is approved, performance-
evaluation reports which provides evidence that employees exist, and lastly,
records of sick and vacation days which provides evidence in testing accrued
payroll.
Slide 9
Let us now move on to the accounting records in the payroll and
personnel cycle. There are three accounting records namely payroll register,
employee earnings record, and labor distribution journal.
What is payroll register? Well, payroll register includes a list of each
payroll check, along with gross pay, amounts withheld, and net pay. The
payroll register, sometimes called a payroll journal, is a book of original
entry. Totals for each payroll are posted to general ledger accounts.
Slide 10
How about employee earnings records? Employee earnings records includes
for each employee for each period the date, check number, gross amount,
deductions, and net pay. The record includes the gross earnings and deductions
for the year to date and may include other data, such as the number of hours
worked during each payroll period.
Slide 11
Lastly, labor distribution journal. Report in which, based on an account
code, salaries and wages are allocated to particular accounts, such as direct
or indirect labor or other functions within the entity.
I guess that ends my talk for today. I hope you somehow learned
something from this discussion. Thank you, Marie and Tess for having me today.
Thank you everyone.
