Question

Which of the following is the best way for an auditor to determine that every name on a company's payroll for the Rodgers factory is that of a bona fide employee presently on the job?

1) Examine personnel records for accuracy and completeness.
2) Examine employees' names listed on payroll tax returns for agreement with payroll accounting records.
3) Make a surprise observation of the company's regular distribution of paychecks.
4) Visit the working areas and confirm with employees their badge or identification numbers.

Answer 1

The most effective method is for auditors to make spot checks during payroll distribution and to verify employee identities in their work areas. This combines direct observation with record verification for payroll accuracy.

Step-by-step explanation:

The best way for an auditor to determine that every name on a company's payroll is that of a bona fide employee presently on the job is to make a surprise observation of the company's regular distribution of paychecks and to visit the working areas to confirm with employees their badge or identification numbers. This direct approach not only verifies the presence of employees but also connects their identity to payroll records. Both personnel records and payroll tax returns are also important to examine for accuracy and completeness, however, they may not provide information about current employees on the job.