Question

An audit trail enables a person to trace a source document to its ultimate effect on the financial statements or work back from amounts in the financial statements to source documents. Describe the audit trail of payroll and use a flowchart to depict your description.

How do I create a flow chart for the following steps I came up with (are they correct)? I am having an issue conceptualizing the flow chart for these steps:

1. Connect timecard/ contract with a payroll worksheet which are generally imported to Excel from a different data store.

2. Link the payroll worksheet to the check (or other payment method) as well as the tax payment information.

3. Link the check/ tax payment information to the general ledger via a general journal entry.

a. Use the GL code as a reference to tie this transaction back to once it is reported on the income statement.

Thank you!

Answer 1

First of all take reviewed time card / contract of emloyees from the HR departement.

import the same to ecxel and do a test check on the correctness accuracy and completness of the same excell sheet.

apply the tax rates appicable for each employee which will generally be standardised as per the appropriate tax rules or acts.

Arrive at the final tax liability and verify the payments challans.

match it with actual liability to ensure that complete payment is done without any due left.

ensure that appropriate journal entries are passed in books of accounts.

Link the challan numbers with journal entries in the books of accounts and once better cross verify with the bank statament.

cross check the expenditure entry with payment entry and ensure that both are in line and matching.

GL code shall be used as reference to tie it back once it is reported in the FS.

The steps in the given question are almost correct provided addition checks as mentioned makes it much detailed and precise to ensure completeness and accuracy.