What it is
Payroll is usually a large expense that is processed through a fairly routine system, which makes it well suited to analytics, controls testing and reconciliations. The key risks are fictitious employees, unauthorized rate changes, misclassified workers and unrecorded accrued compensation.
This program covers the control environment, analytics, tests of payroll transactions, reconciliations to payroll tax filings, accrued payroll and paid time off (ASC 710), share-based compensation and presentation.
When to use it
- Planning the payroll section of an audit.
- When payroll is outsourced and you need to consider the service organization.
- Alongside the payroll testing workpaper and payroll audit checklist.
What’s inside
- Understanding payroll processing, service organizations and segregation of duties
- Analytics on headcount, average pay and payroll as a percentage of revenue
- Transaction testing: hire, termination, rate, hours, withholding and net pay
- Reconciliations: register to GL, Forms 941 and W-2
- Accruals, bonuses, paid time off, retirement plan contributions and share-based pay
Standard cited
This template follows AU-C 330 / ASC 710. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 330 explained.
Questions
What is a ghost employee test?
It is a test that payments go to real, currently employed people. Typical steps are tracing a sample from the payroll register to HR files, tracing terminated employees to confirm no pay after the termination date, and comparing payee bank accounts and addresses for duplicates.
If payroll is outsourced, can I rely on the provider?
The entity remains responsible for payroll. If the provider’s processing is relevant to the audit, AU-C 402 has you obtain an understanding of the service and, where relying on controls, use a SOC 1 report or test controls at the provider.
Related templates
Last updated 11/04/2026. All free templates.