What it is
Payroll testing checks that a sample of employee pay is authorized, calculated correctly and paid to a real, current employee, then reconciles the payroll register to the general ledger and to the payroll tax filings.
This workbook has a transaction test that recomputes gross pay and the employee share of Social Security and Medicare tax, a net pay check and HR / authorization attributes, and a reconciliation of the register to the GL, Forms 941 and W-2, with an accrual calculation at year end.
When to use it
- On audits where payroll is a significant expense and you test it substantively or test controls.
- To reconcile the payroll register to quarterly filings and annual W-2 totals.
- When testing for ghost employees or unauthorized rate changes.
What’s inside
- Setup: tax rates and the Social Security wage base as inputs for the year under audit
- Transaction test: hours, rate, overtime, recomputed gross, FICA recomputation, net pay, attributes
- Reconciliation: register to GL, to Forms 941 and to W-2, with check cells
- Year-end accrued payroll calculation
- Use employee IDs, not names or Social Security numbers, in the file
Standard cited
This template follows AU-C 330 / AU-C 530. 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, AU-C 530 explained.
Questions
Which payroll tax rates should I use?
The employee Social Security and Medicare rates and the Social Security wage base are set by law and the wage base changes each year. The workbook has inputs for them: the rates are pre-filled at 6.2% and 1.45%, and the wage base is left blank on purpose, so enter the figure for the year under audit from the Social Security Administration before testing. Additional Medicare tax on high earners and state taxes are not recomputed here.
Why should the reconciliation include Form 941 and W-2?
They are external, filed records. Agreeing the register to them tests completeness and accuracy of the register and can reveal unrecorded or fictitious payroll. Reconciling items such as pre-tax deductions and fringe benefits should be explained.
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Last updated 11/04/2026. All free templates.