Why would an auditor choose to examine average payroll by employee classification?

 

In the process of auditing, it is very important for the auditor to examine average payroll by employee classification and the reasons are as captured below.

First reason is because of the need to examine the ghost employees that might be appearing in the payrolls.

Second reason is that auditor would choose to examine average payroll by employee classification in order to spot the calculations mistakes like in the cases of hand noted calculations.

Third reason is that the average payroll by employee classification would allow the auditor to examine if the terminated employees are still being captured in payment or are still being remunerated by the firm.

First of all, when the auditor examines the average payroll by employee classification, the auditor would be able to detect the instances where the firm could have been fraudulent by allowing the payment to the ghost employees who squander money from the firm. The payroll audit by classification of the employees would reveal the correctness of the classification of the employees and how they are paid as per their respective classifications and to prevent the instances of ghost employees or the mismarked timecards used in the payment to the employees.

Second reason is that an auditor would choose to examine average payroll by employee classification in order to spot the calculations mistakes in the event that some of the payrolls were done by hand and the mistakes were made that could alter the resultant figure that is to be correctly captured in the payroll framework to the employees.

Thirdly, examining the average payroll by employee classification would allow the auditor to examine if the terminated employees are still being captured in payment or are still being remunerated by the firm. If the reflection is still on even though the employees had been terminated, then definitely there would be a mischief and the examination would detect this. This would mean that the auditor would seek to determine the accurately paid employees and the inaccurately paid employees like the case of the terminated employees.