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Audit procedures For Cash Accounts Receivables Accounts Payable and Verification of Company Wages and Salaries

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Business is a going concern and therefore, all activities and operations carried out must be planned and monitored on a regular and continuous basis in order to ensure maximum output and returns. To achieve this, airtight audit procedures have to be instituted in some delicate areas of business operations especially as it relates to wages, salaries, income, expenditure and other account items.

For company wages and salaries, substantive tests may be conducted by the company's procedural audit unit in the following manner:

• Verify that the engagement of new employees as well as discharges.have been effected and taken account of in the organizational payroll.

• Check the basic pay of each of the company's staff in line with the approved pay rate.

• Check the calculation of gross pay with the actual number of days worked.

• Check that extra pay such as increment, allowance and bonus are properly approved.

• Check the calculation of approved deductions.

• Trace deductions to the approved source documents.

• Check totals of the net pay to payroll summary.

• Check that wages and salary payments have been properly approved and authorized.

• Verify that all unclaimed wages and salaries are returned to the office of the group head of finance within a reasonable period of time ranging form the date on which the salary check was issued.

• Confirm receipt of cash paid to employees through their respective signatures as contained in the payroll ledger.

• Confirm payment of salaries through bank transfers the bank accounts of the specified employees through approved source documents.

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[Post Image Courtesy of MrsIraphol at FreeDigitalPhotos.net]

In addition to the above too, it is worthwhile also to lay proper emphasis on the audit procedures to be followed with respects to the acknowledgement of incomes, expenditures and other miscellaneous account items accruing to a business at any given point in time.

Take note that the term ''Other Income'' refers to that income derived from all other activities that do not fall into the course of normal operations in a given business arrangement. In some cases, they are correctly referred to as ''Other revenue'' as well. Instances of other income items includes sale proceed from the disposal of fixed assets other than the stock inventory, sale of jerry cans, jumbo bags, empty drums, scraps and the likes of them. The audit procedures for the ascertainment of such income items includes the following:

• Confirm that any of such items that give rise to ''Other Income'' have been dully paid for by the buyers.

• Confirm the delivery of the items in question to the buyers who must have paid for them.

• Confirm that such payments are being captured in the bank books as ''Other Income''.

• Confirm that such incomes are adequately, properly and rightly categorized and presented in the books of accounts as well as in the end-of-the-month reports.

On the other hand, expenditures (otherwise known as expenses) are those economic and financially beneficial costs incurred by a business through its operations to earn revenue and make profits. Examples of expenses includes payments made to the suppliers of raw materials and business inputs, money paid for the procurement of raw materials, employees wages and salaries, among many others. Thus, the following substantive tests and procedures will be applied by the procedural unit auditors in the verification of business expenses:

• Obtain schedules of all expenses which must be properly filed into their various classes.

• Obtain a specimen of signatures of all officials mandated to authorize and approve various classes of expenses within the organization.

• Verify to a reasonable extent that each expense is properly authorized and approved.

• Find out the expenditure approval limits for each and every one of the authorizing officials.

• Verify that expenses are properly classified.

• Check the calculations and additions for all invoiced at hand.

• Check properly that the values for each of the expenses are received after a rightful scrutiny and inspection of the delivery documents or performance reports.

• Check all entries in the expenses register and verify that the were all correctly analyzed.

• Check and confirm the correctness of all the postings made into the general ledger.

• Trace expenses totals to the final accounts and monthly reports.

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About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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