Auditing Payroll, Revenue & Inventory

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How to Identify the Five Components of Internal Controls

When you are performing an audit, to judge the reliability of a client’s internal control procedures, you first have to be aware of the five components that make up internal controls. For each client, [more…]

What to Look for When You Audit Revenue

Revenue is important to the audit because it’s one of the two major business processes. (Purchasing is the other.) It’s also the major account in which you look for instances of financial misstatements [more…]

Using the Accrual Method to Record Revenue During an Audit

When you perform an audit, you check a company’s revenue recognition, which has to reconcile with generally accepted accounting principles (GAAP). This means, in most cases, that the straight-out accrual [more…]

Following the Flow of Revenue In an Audit

You can’t effectively or efficiently audit your client’s revenue transactions unless you understand how the client handles them. Each client you audit will probably approach each of the business processes [more…]

Assessing the Inherent Risk of Selling Goods and Services

When performing an audit, you look at revenue transactions. As the auditor you need to factor in any inherently risky circumstances that affect the revenue accounts. Generally, you look at four inherent [more…]

Audit Procedures: Monitoring Personnel Records

Making sure your audit client is current with all areas of human resources-related compliance is one way to judge the competency of employees when you’re deciding whether to limit audit procedures. So [more…]

How to Test Payroll Expense Transactions

During an audit, testing payroll transactions includes sniffing out employees paid who shouldn’t have been and making sure valid employees are paid the correct amount. Auditors also need to make sure the [more…]

How to Test Employee Payroll Taxes

One way auditors test employee payroll-related items is to make sure the related employer expenses are properly accounted for on the books. It’s the auditor’s responsibility during the audit to sample [more…]

How to Examine Human Resources Risks and Controls

At every step of an audit, you have to consider risks and their associated controls. Generally, you look at three inherent human resources risk factors: the supply and demand of competent employees, existing [more…]

Three Ways Error and Fraud Can Exist in Payroll

When you assess a client’s payroll control risk during your audit, remember that the control risk is directly impacted by payroll internal controls set in place by the business. A company can introduce [more…]

How to Detect Errors and Fraud in Payroll

If payroll fraud exists, it is likely to occur in one of three ways: During an audit you can use the following methods to detect all three circumstances of payroll error and fraud: through paying fictitious [more…]

How to Test Accrued Payroll Liabilities

Making sure the company books its payroll accruals properly is fairly easy. By the time you conduct your audit, all employees whose unpaid payroll transactions should have been accrued have been paid. [more…]

Handling Inventory Audits for Manufacturing Firms

If your audit client manufactures items, it doesn’t have a merchandise inventory. Manufacturers have three other types of inventory you need to know how to handle as an auditor. These three types are as [more…]

How Inventory Systems Work

To perform an audit, you have to know how your client handles inventory. Knowledge about different inventory systems helps you to plan and execute an effective and efficient audit. Two major types of inventory [more…]

Auditing Valuing Ending Inventory Systems

Depending on the method your audit client uses for value ending inventory, the amount transferred from the balance sheet inventory account to the income statement cost of goods sold can vary wildly. Your [more…]

What to Look for When Auditing Inventory

The primary reason auditors observe their client taking the physical inventory is to make sure the inventory reflected on the balance sheet actually exists and that the balance sheet includes all inventory [more…]

How to Assess Inherent Inventory Management Risks

At every step of an audit, you have to consider risks and their associated controls. At this inventory stage, your focus is on identifying risks that exist in the inventory management process and the internal [more…]

How to Assess Inventory Management Control Risk

When you assess a client’s inventory management control risk during your audit, remember that the business’s internal controls directly affect that risk. The inventory management process has control risk [more…]

Testing Inventory Transactions

After you test inventory and verify that your audit client is following its standards, you’re ready to start testing management assertions. For inventory transactions you test these five management assertions [more…]

How to Hire Permanent Employees for Your Micro-Entrepreneurial Business

Hiring an employee isn’t a light decision, so if you decide to add permanent people for your micro-entrepreneurial business, tread carefully. Outsourcing is a temporary and limited solution for some workload [more…]

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