[AMERICANDREAM]

An auditor reviews the reconciliation of payroll tax forms that a client is responsible for filing in order to:

(a) Verify that payroll taxes are deducted from employees’ gross pay
(b) Identify potential liabilities for unpaid payroll taxes. –> Correct

I feel like the answer could go either way and I feel like this for most of the AUD questions lol

Could someone please help me with this?

[Anonymous]

I think because an auditor is more concerned about unpaid liabilities, they would be more concerned about those payroll taxes not being paid, rather than being deducted from pay. There is a possibility that they are deducted properly and not paid out to the proper tax authority (plenty of cases of fraud like that actually). Hopefully that makes sense?

[GrumpiestMage22]

I think a good way to look at it is ask yourself, “where's the risk?” More likely than not, the employee will catch the fact that taxes aren't being deducted from their pay, or they will find out at tax time, but just because it was deducted from the employees' pay doesn't mean that the employer actually paid the taxes to the IRS, State or whoever. The employer could be pocketing the money and using it for other purposes; therefore, unpaid liabilities is more of a risk than the employer not deducting taxes from the employee.

[Anonymous]

If you don't deduct taxes from an employee's paycheck, then the employee owes the government. Not the business.

If you deduct taxes, but forget to pay them in, then its an unpaid liability.

[Missy]

Not all payroll taxes are deducted from the employees pay, the employer also has a payroll tax responsibility. Looking at the employees deductions only shows part of the payroll tax.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Author]

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