Question

While vouching wages, auditor should examine whether there is proper segregation of duties. Which of the following activities should not be done by same department?

• A. Maintaining personnel records and approving changing in wages rates
• B. Proposing pay roll summary and disbursement of wages
• C. Making salary statements and filling tax returns
• D. Comparing time clock records with time reports prepared by supervisors and preparing list of workers employed along with the units of production for each one of them

Answer 1

Answer: (B)

Proposing pay roll summary and disbursement of wages

Internal control of the organization should be made in such a way that the task of one person should be checked by another person. This is also termed as maker and checker concept.

Hence Auditor should ensure while vouching the wages that maker and checker concept is followed. This means, preparation of pay roll should be done by one department and disbursement to be done by another department.