Reference no: EM133260607

Question: Are salaries overstated due to shifts of workers between job duties? Are there any key audit risk areas and any procedures that still need to be performed to get this audit done.

Salaries - Obtained a CSAE 3416 report provided by MSC's third party payroll company. Reconciled the total salaries paid for the year (including those allocated to inventory / cost of sales). I discussed the allocation process with HR director Jett Scribner. He explained that MSC calculates total non-office staff salaries on a weekly basis and allocates the amount out to individual projects based on actual hours spent per week. He noted this led to a few 'unusual' allocations this year as there were a few weeks where sales were so slow that MSC was only working on one project in that week, and a number of manufacturing employees were temporarily reassigned to administrative duties. He estimates this led to about $12,000 of salaries during fiscal 2022 that were allocated to the Parks Canada project instead of administration, all of which is in WIP at year-end. In addition, Jett mentioned that there has been a lot of turnover, and some staff members have gotten tired of administrative assignments and quit altogether without being replaced. With sales down, the last staff person trained on the electric dog product resigned in April 2022. MSC decided to stop all future sales of electric dogs in May 2022, so the last staff person has not been replaced and manufacturing of the product has ceased.