Intermediate Audit Staff Training: Auditing Payroll

Author: Robert K Minniti

This intermediate level course provides audit professionals with a practical, risk based framework for auditing payroll—one of the most material, complex, and fraud prone areas of the financial statements. Participants will learn how to assess payroll related risks, evaluate internal controls, and design audit procedures that comply with U.S. GAAS, PCAOB standards, and payroll specific regulatory requirements.

Using real world examples and common audit scenarios, the course explores payroll cycles, authorization controls, payroll tax obligations, employee classification issues, and fraud indicators including ghost employees, inflated hours, and unauthorized rate changes. Attendees will gain experience performing analytical procedures, testing payroll accruals, auditing withholdings and benefits, and evaluating management’s use of automated payroll systems.

By the end of this course, participants will be equipped to conduct efficient, well documented payroll audits that enhance audit quality, promote professional skepticism, and reduce the risk of material misstatement.

Publication Date: May 2026

Designed For
This course is ideal for audit professionals responsible for evaluating payroll processes and related financial reporting risks

Topics Covered

• Understanding payroll cycles and key audit risks
• Internal controls over payroll authorization, processing, and distribution
• Testing payroll controls: segregation of duties, system access, authorization, and change management
• Substantive procedures for payroll expenses, taxes, and accruals
• Analytical procedures and data analytics for identifying anomalies
• Fraud risks in payroll: ghost employees, fictitious hours, unauthorized rate changes
• Audit considerations for employee vs. contractor classification
• Testing payroll tax compliance, benefits, and withholdings
• Documentation best practices and common payroll audit pitfalls

Learning Objectives

• Explain the payroll cycle and its impact on financial reporting and audit risk
• Identify common risks, fraud schemes, and red flags within payroll processes
• Evaluate and test internal controls over payroll authorization, processing, distribution, and system access
• Design and perform substantive procedures for payroll expenses, taxes, accruals, and related liabilities
• Audit payroll related taxes, withholdings, benefit obligations, and employee classification
• Apply analytical procedures and data driven audit techniques to detect anomalies in payroll data
• Document audit procedures, evidence, and conclusions in accordance with professional auditing standards

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Auditing (2 hours)

Program Prerequisites
Basic understanding of auditing

Advance Preparation
None