When auditing the payroll and personnel cycle, the auditor should keep in mind that
A) since payroll transactions are typically uniform, all companies have the same internal controls over payroll.
B) the substantive tests of transactions for the payroll cycle are the same for all audit clients.
C) controls the auditor intends to rely on to reduce assessed control risk must be tested with tests of controls.
D) the tests of controls and the substantive tests of transactions for payroll cannot be combined.

Question

Quizplus · Accepted Answer

The auditor should keep in mind that controls in the payroll and personnel cycle vary among companies, and therefore, controls the auditor intends to rely on to reduce assessed control risk must be tested with tests of controls. This ensures that the controls are operating effectively and consistently. The substantive tests of transactions for the payroll cycle may differ among audit clients based on the specific risks and internal controls in place. Therefore, the auditor should tailor their audit approach accordingly. The other choices are incorrect because they assume uniformity in the payroll and personnel cycle, which is not the case.

When Auditing the Payroll and Personnel Cycle, the Auditor Should