Last Friday (22/09), Mr. Mikail Jaman, Ak., M.Ak., CA., CPA., CPI as a managing partner, and Mr. Dimas Emha Amir Fikri Anas, SE., M.SA., CA., CPA as a partner of audit & assurance of Malang Branch were the speakers at the Technical Gathering on Friday (TGIF) which is routinely held every Friday.

TGIF is a forum for all employees of KAP Agus Ubaidillah dan Rekan (TGS AU Partners) to obtain information and knowledge in the fields of audit, tax, finance, business, and soft skills training materials. KAP Agus Ubaidillah dan Rekan is committed to TGIF activity is not only beneficial for internal companies but can also be obtained for the general public.

The discussion of TGIF material presented on "Payroll Business Cycle: Employee Benefits Accounting, Internal Controls, and Audit Procedures."

Overview of Payroll Business Cycle Audits

In the context of an audit, the payroll business cycle is one of the important areas to examine. The payroll business cycle in the context of an audit involves a number of steps that are critical to ensuring compliance, accuracy, and reliability of financial information related to employee salaries and benefits. The following is an overview of how employee benefits accounting, internal controls, and audit procedures are related in conducting a payroll business cycle audit:

A. Employee Benefits Accounting

Employee benefits accounting is an important part of the payroll business cycle and is the accurate recording and reporting of all elements of employee benefits. This includes salaries, allowances, bonuses, pension contributions, health benefits, and other components of employee benefits. Proper record-keeping is necessary to ensure that financial information related to employee benefits is properly reflected in the financial statements.

  1. Identification and Recording: The auditor should check whether all elements of employee benefits, including salaries, allowances, bonuses, pension contributions, health benefits, and other benefits have been properly identified and recorded in the company's financial statements.

  2. Presentation in Financial Statements: The auditor will examine how employee benefits are presented in the financial statements, including disclosures about long-term liabilities such as pension contributions and post-employment benefits.

B. Internal Control

Internal controls are processes and policies implemented by the company to ensure that the payroll process runs properly, efficiently, and in accordance with regulations. Internal controls involve access control, authorization, segregation of duties, and data validation to prevent errors and misuse. Auditing involves testing these controls to assess the effectiveness of the company.

  1. Control Check: The auditor will test the internal controls implemented in the payroll business cycle. This includes access control, authorization, segregation of duties, and data validation.

  2. Assessment of Control Effectiveness: The auditor will assess whether the internal controls in place are effective in preventing errors or abuse in the payroll process.

  3. Risk Identification: The auditor will identify potential risks related to internal controls that may affect accuracy and compliance in the payroll cycle.

C. Audit Procedures

Auditors perform a series of audit procedures to check the integrity and reliability of the payroll process. This includes an examination of documents such as attendance lists, time reports, employment contracts, and employee benefit records. Auditors also test the accuracy of salary calculations, tax deductions, and other benefits. Examination of the company's financial statements to ensure proper recording of salary expenses and employee benefit liabilities is also an important part of the audit procedures.

  1. Document Inspection: The auditor will examine documents such as attendance lists, time reports, employment contracts, pension agreements, and other employee benefit records to verify the correctness of the data used in the calculation of salaries and benefits.

  2. Substantiation Testing: The auditor will test the accuracy of the calculation of salaries, withholding taxes, and other benefits. This includes ensuring that salary calculations are in accordance with company regulations and applicable tax regulations.

  3. Examination of Financial Statements: The auditor will examine the company's financial statements to ensure that salary expenses and employee benefit liabilities are recorded correctly and in accordance with applicable accounting principles.

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  4. Conclusions and Recommendations: The auditor will draw conclusions about the company's compliance with laws and regulations, the accuracy of salary calculations, and the effectiveness of internal controls. If problems are found, the auditor will provide recommendations for improvement to management.

The payroll business cycle involves employee benefits accounting, internal controls, and rigorous audit procedures to ensure that employee payroll is done correctly, efficiently, and in accordance with all legal and regulatory requirements. This is important to maintain company and employee compliance and ensure accountability and transparency in the company's human resource and financial management.

In conducting a payroll business cycle audit, auditors are responsible for providing assurance that employee payroll processes are being performed correctly and that financial information related to salaries and employee benefits is accurate and reliable. In addition, audits also assist companies in identifying opportunities to improve efficiency, reduce risk, and ensure compliance with applicable laws and regulations.

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