Reference no: EM132891103

Assessing the results of payroll substantive testing

• The human resources department at CrashTackle Logistics is responsible for selecting and appointing employees, approving pay rates and promotions, and processing employee terminations. The payroll department is responsible for preparing the weekly wages based on the information from the human resources department and according to hours worked by each employee. CrashTackle Logistics has a number of long-term contracts to deliver goods along the eastern seaboard. The company operates a fleet of large trucks and has a number of permanent drivers who are assisted by other drivers on short-term contracts during busy times of the year (such as the three months prior to Christmas). Drivers work long shifts and most of the driving is done at night.
• During busy times the human resources department falls behind with processing paperwork related to the short-term contract drivers. In particular, there are constant complaints from the drivers that they have to wait several weeks after they start work for their first pay.
• Gordon is testing the payroll process. He discovers that the complaints from the drivers are justified; it takes on average three weeks from the date the driver starts work for the relevant authorisation for the driver's pay to be received by the payroll department. However, he also finds that on average drivers are paid for one additional week after they actually leave the company because the human resources department does not record the termination date accurately. The payroll department tells Gordon that, because of the confusion, no provision is made for accrued wages at year-end.

Required

Problem (a) Based on Gordon's findings, which accounts are likely to be misstated and which assertions are violated?

Problem (b) What tests would you recommend that Gordon perform to substantiate weekly wages expense