In earlier article, we have an understanding of what is a depth test or “cradle-to-grave” test and some of its objectives. Append below is an illustration of a depth test on weekly wages
Objective Of Depth Test On Weekly Wages
· To confirm the operation of controls of wages and help to substantiate the wage charge in the profit and loss account.
Audit Work/Procedure of Depth Test on Weekly Wages
- Select a sample of employees from the payroll. The sample should include at least one employee from each department and should include some new employees taken on during the year. The sample should also cover the various payment methods eg flat-rate, time-work, piece-work
- Check new employees against personnel records, checking proper authorization for employment
- Verify gross pay against rates of pay in the personnel records and authorities for employment
- Verify deductions such as PAYE and insurance to personnel records, tax tables,etc. Check that such deductions are credited to control accounts and have been paid by the company or are accrued at the end of the year
- Check that the payroll has been signed by a responsible official as authority for payment
- Examine evidence of cheques drawn for wages
- Examine any evidence of receipt by the employee such as a signature record
- Follow through personnel records of those who have left employment to the wages records
- Follow the payroll details through any wages control account to the financial statements.