[Gusher_hi]

During year 2, the company instituted a new procedure whereby the internal audit department distributes payroll checks to employees for selected payroll cycles.

How does this impact control risk, inherent risk and detection risk? Please state response for each component (either increase, decrease or no impact). Provide explanations as well.

Appreciate your inputs.

[Future Ninja]

Good question. We know that payroll checks should be distributed by a person who has no payroll function (ARC). Internal audit dept compares personnel files with payroll files to help ensure only authorized payments have been made in the proper amounts to appropriate personnel.

To my mind, this may decrease control risk because internal audit has segregation of duties from HR and Payroll (acctg). decrease control risk, may increase detection risk because a strong internal control may lead to a little work of sampling and gathering evidence.

Correct me if I'm wrong. Anybody out there has a better inputs?

Appreciate it. Thanks.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[UM1868]

Your internal audit department should never be doing stuff like this. This is also a new control. The key for an internal audit department is objectivity and competence. This control would impair their independence in my opinion. It being a new control; I would say it increases control risk. This would then decrease acceptable detection risk.

Bec-76 (7/14)
Aud-81 (8/14)
Reg-82 (7/15)
Far- 82 (10/15)

Moral of the story, don't do your CPA while working in Big 4 Public Accounting.

[UM1868]

From what I see online, they agree with @NinjaCPA because of segregation of duties.

I was always under the impression that Internal Audit shouldn't be involved. I dunno

Bec-76 (7/14)
Aud-81 (8/14)
Reg-82 (7/15)
Far- 82 (10/15)

Moral of the story, don't do your CPA while working in Big 4 Public Accounting.

[Author]

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