Other Transaction Cycles Audit Simulator
An Interactive Guide to Auditing PP&E, Payroll, and Financing
Auditing Property, Plant, and Equipment
This cycle covers the acquisition, depreciation, and disposal of long-term tangible assets.
Key Internal Controls
- ✓Acquisition: Major purchases require a formal, approved requisition and should be tied to a board-approved capital budget.
- ✓Subsidiary Ledger: A detailed ledger is maintained for each asset, including description, ID number, location, cost, and depreciation details.
- ✓Physical Security: Assets have ID plates and are physically secured. Periodic physical inspections are performed.
- ✓Disposal: Asset retirements are documented on a sequentially numbered work order with proper authorization.
Substantive Audit Procedures
Auditing Payroll & Personnel
The biggest risks in payroll are fictitious employees and falsified hours. Strong segregation of duties is the primary defense. Hover over each role to see its responsibilities.
Human Resources
Authorization to employ and set pay rates.
Supervision
Approves hours worked, overtime, and time off.
Timekeeping
Gathers and accumulates time data (e.g., time clocks).
Payroll Dept.
Computes net pay and prepares unsigned checks (Record Keeping).
Treasurer/CFO
Signs and distributes checks (Custody).
Key Substantive Procedures
When controls are effective, auditors often focus on analytical procedures and recalculating accruals.
- Perform analytical procedures on payroll expense (e.g., compare to budget or prior year).
- Recalculate year-end payroll accruals (for wages earned but not yet paid).
- If controls are weak, vouch a sample of payroll register entries to time cards and personnel files.
- Observe payroll distribution on an unannounced basis to verify employees exist.
Auditing the Financing Cycle
This cycle covers how a company raises capital through debt and equity. All significant transactions require board authorization.
