Original Question: (Do not reply to this one)
Why is it important for the client to establish control activities over the classification of payroll transactions?
Student Discussions:
Reply to each student posts by commenting about their posts and building on the subject (About 100 words each) APA reference.
APA reference.
1-Alexander Beasley-Toune
The reason why the client must establish control activities over the classification of payroll is for a few different reasons. The first reason for the classification is so that during every payroll all the correct accounts are credited and debited accordingly and so it can be accounted for in the right period incurred along with the correct amounts. The second reason for this is so that there is no misstatement of the expenses or accounts related to payroll otherwise it would and could cause an issue and get them in trouble for not reporting correctly. The third and final reason of why this is needed is so that the proper classification occurs so none of the prior things mentioned happens otherwise it would cause an overall mess for anyone who was involved in the process because you wouldn’t want a misstatement on any financial statements that could be audited or used against you for improper financial reporting.
Reference:
Messier, W. F., Glover, S. M., & Prawitt, D. F XXXXXXXXXXAuditing & assurance services: A systematic approach (10th ed.). New York: McGraw-Hill/Irwin.
2-Jessica Graham
Without proper control activities over the classification of payroll transactions clients can become susceptible to fraudulent activities. For instance, if a client does not have proper segregation of duties, which is one of the most important control activities, it would be possible for an employee to make payments to fictitious employees and to valid employees who have not worked. It is also important that a client have authorization procedures for hiring and terminating employees, setting pay rates, and issuing payroll checks. With these procedures and periodic reviews of the payroll register for unusual amounts a client can prevent the likelihood of unauthorized payments and payments made to employees at an unauthorized rate. To ensure transactions are charged to the appropriate payroll accounts, clients should maintain and review budgeted payroll cost with actual cost. These are just a few examples of how important it is for a client to establish effective control activates that help to prevent fraud of payroll transactions.
Reference:
Messier, W. F., Glover, S. M., & Prawitt, D. F XXXXXXXXXXAuditing & assurance services: A systematic approach (10th ed.). New York: McGraw-Hill/Irwin. ISBN: XXXXXXXXXX