ISSAI 1240

ISSAI 1240
practice note 240
• Review timesheets for indications of:
– Authorization by someone other than the usual supervisor;
– Missing, unusual or altered timesheets, especially if recurring for the same employees;
– Excessive or unusual amounts of overtime;
– Use of unusual or inappropriate time codes or employee classification codes.
• Perform substantive testing of payroll accounts for indications of:
– Excessive or unauthorized amounts of overtime;
– Unusual variations in regard to budget vs. actual figures, or seasonal fluctuations;
– Payments made to unusual bank account numbers or accounts in unusual locations (for
example more than one payment in a period to the same bank account may indicate fictitious
employees);
– Comparison of year-end reported earnings for employee / groups of employees to standard
compensations levels for the appropriate employee category.
• Review hiring procedures and controls and test that:
– Advertised open positions have been appropriately authorized;
– Positions have been advertised in accordance with regulations (transparency, open and fair
competition etc);
– Appropriate routines have been followed in the hiring process (interview, references, possible
background check, appropriate salary levels etc);
– If any indications of close personal relationships, prejudice etc are present that these have been
appropriately addressed;
– Any complaints received in regard to the hiring process have been appropriately handled.
The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements 233