An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries are paid. The primary purpose of this audit procedures is

 Options:

a) to ensure that there are no ghost workers b) to ensure the casual workers employed are authorized by the supervisor c) to test procedures for distributing pay cheques d) to obtain understanding of internal control system

The Correct Answer Is:

c) to test procedures for distributing pay cheques

Correct Answer Explanation: c) to test procedures for distributing pay cheques

First, let’s delve into why the correct answer is option C: “to test procedures for distributing pay cheques.” Conducting surprise checks on paydays serves the purpose of assessing the effectiveness and reliability of the processes involved in distributing pay cheques to employees.

This audit procedure ensures that the payroll distribution follows established protocols, such as accurately calculating wages, verifying employee details, and confirming the legitimacy of the pay cheques issued.

By conducting surprise checks, auditors can observe firsthand whether the procedures for distributing pay cheques are being followed correctly and if there are any discrepancies or irregularities in the process. This helps in ensuring the integrity and proper functioning of the payroll system within an organization.

Now, let’s dissect why the other options are not the correct answers:

a) “to ensure that there are no ghost workers”:

While this is a valid concern for payroll audits, the specific purpose of conducting surprise checks on payday isn’t solely to detect ghost workers.

The presence of ghost workers non-existent employees on the payroll is typically addressed through a broader range of audit procedures that involve verifying employee records, cross-referencing with HR data, and conducting periodic personnel audits. While surprise checks might incidentally help in identifying such discrepancies, it’s not their primary purpose.

b) “to ensure the casual workers employed are authorized by the supervisor”:

Ensuring authorization for casual workers is an important aspect of payroll management, but it falls under the broader umbrella of internal controls and hiring procedures. This aspect typically involves validating the legitimacy of hiring through documented approvals, contracts, or other relevant authorization processes.

While surprise checks might incidentally verify the presence of authorized casual workers, the primary focus of these checks isn’t solely to ensure supervisor authorization on paydays.

d) “to obtain an understanding of the internal control system”:

While conducting surprise checks on paydays can offer insights into the functioning of internal controls related to payroll, their primary objective is not merely to gain an understanding of the internal control system.

Auditors usually conduct specific internal control assessments separately, which involve evaluating the overall effectiveness of controls in place, identifying weaknesses, and recommending improvements. Surprise checks on paydays serve a more targeted purpose of directly assessing the payroll distribution procedures’ accuracy and compliance.

In summary, while options a), b), and d) touch on aspects relevant to payroll and internal controls, conducting surprise checks on paydays primarily aims to assess the accuracy and adherence of procedures for distributing pay cheques, ensuring that employees receive their rightful wages in accordance with established protocols and controls.

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