Critique for The Final Payroll Audit Report for Greater London Authority, 2010

The Greater London Authority decided found it necessary to carry out an internal audit to determine the accuracy of the payroll records.  The management decided to have an internal audit carried out on the payroll to determine the accuracy of the payroll records and the information provided by the management. Through the internal audit, the company aimed at preventing losses to the company through inaccurate payroll records. The final payroll audit report outlines the observations that the internal auditors made on various tests they carried. The background of the audit is provided so as to enhance the understanding of the report to the users.  It also gives a report on the accuracy of payroll documents by providing an overview of records for the starters and leavers in the organization. It also highlights the various amendments that have taken place in the organization and provides recommendations relating to the same.

To make it easier for the users to understand the report there is a section on changes to the current data.  The report also provides information on segregation of duties and statutory deductions. Information on accounting is also very useful as it is one of the areas that affect accuracy of payroll records.  For an audit report to be accurate and reliable, it must be consistent with the International Professional Practice Framework (IPPF). This paper provides a critique for the final payroll audit report for Greater London Authority based on the extent to which the auditors complied with the IPPF.  The main aspects used in testing the reliability of the audit report include compliance with IPPF, relevance of the report to the organization’s objectives and governance structures in place.  Its reliability is also determined by the extent to which the stakeholder’s of the internal audit can be able to use the information provided.

  1. Compliance with IPPF

International Professional Practice Framework is an important tool for enhancing the reliability of internal audit reports.  The primary mission of the IPPF is to protect the value of organizations by providing risk-based assessment of the organization’s situations and advising the management accordingly.  The core principles of the IPPF include integrity, professionalism and enhancing communication of the audit report to the stakeholders. The framework also contains a code of ethics that guides the internal auditors’ behaviors to enhance competency, objectivity, integrity and confidentiality. The attribute standards in the framework address the procedures that should guide the internal audit.  Performance standards are also part of the framework, aimed at enhancing the value of internal audit to the organization.

  • Positive points

The report is compliant with the IPPF because it obeys the core principles of internal control. Integrity is one of the IPPF codes that the report complies with as indicated by the fact that data collection is based on a representative sample. This makes the reliability of the report possible as the level of accuracy is high.  The other IPPF code that report complies with is the performance standards as it is able to communicate useful information to the users such as detailing the accounting procedures used in compiling the payroll. It also shows some attribute standards such as quality assurance as it highlights the strengths and weaknesses of the audit at the observations and recommendations sections.

2.2 Negative aspects

The report is not fully compliant with the International Professional Practice Framework because it fails to address the mode of communication to be used in notifying the stakeholders in the internal department. Although the report addresses the way the human resources department maintains records for the employees after they resign, it does not recommend the way such information should be communicated to other departments. This is inconsistent with the IPPF because the internal audit has failed in providing advice and insight to the organization.

  1. Relevance to the organizational objectives

The nature of organizational objectives determines the objectives of the internal audit because they are consistent with the core activities of the organization (Pitt 2014, P. 123). The main objectives of the organization in relation to internal audit are to evaluate the accuracy of the payroll records in relation to the number of current employees. It also aimed at ensuring the accuracy of management information by evaluating the accuracy of quarterly reports provided by the chief accountant, the human resource and finance departments. It is evident from the report that the internal audit is relevant to the organization’s objectives but it has some aspects that make it inconsistent with the objectives.

  • Positive points

The report enhances the accuracy of the payroll records by carrying out tests on voluntary deductions made on the payroll. It was reported that the deductions had authorized supporting documents, an indication that the payroll records were accurate.  The report is also relevant to the organization’s objectives due to the fact that it addresses the factors that contribute to the accuracy of management information.

  • Negative points

The report does not address the ways through which the chief accountant may address the challenges of the organization and this may affect the quality of payroll records maintained.

  1. Relevance to governance structures and systems in place

It is crucial for internal audit to consider the needs of the personnel that govern the organization and the structures and systems in place. The report must consider the needs of the executive officers in the organization especially when communicating the audit report.

  • Positive points

The report is comprehensive thus it is applicable in the systems of the organization so as to enhance its performance. It is possible for the company’s management team to use the report in addressing the issues identified as problematic.

  • Negative points

The report fails to address the needs of specific divisions in the organization thus it may be irrelevant in addressing the payroll issues in the organization. This makes it difficult for the governance structures to use the report and it may affect decision making roles in the organization.

  1. Its use as a strategic document in communicating to the stakeholders of the internal audit

The internal audit stakeholders are the individuals such as managers, who may need the information to use it in various decisions affecting the organization. They may need the information to make decisions such as rotation of duties among the employees to prevent fraud.

  • Positive points

The report provides useful recommendation on voluntary deductions thus enhancing the usefulness of the internal audit in promoting accuracy of payroll records. This communicates effectively to the users of the audit report. The recommendations provided enables the users to make sound decisions based on actual performance of the company.


  • Negative points

The report does not provide recommendations on segregation of duties which is one of the high risk areas. The users of the report may need to know whether there is need to change the personnel of the company’s finance and human resources departments.

  1. Overall opinion, conclusion and how to improve

The report is relevant to the organization’s objectives because it show the test results of variables that affect the accuracy of payroll records. The positive elements of the report outnumber the negative ones, indicating that it is relevant in solving the payroll issues in the organization. However, the fact that the negative aspects are few does not guarantee success of the organization. The internal audit needs to enhance the accuracy of the report by carrying out more tests. An audit report that complies with the IPPF contributes to the success of an organization through enhancing communication to the relevant stakeholders. Although the final payroll audit report by GLA has some negative aspects, the management can use it to enhance its performance. The relevance of the report to the company’s objectives makes it a suitable document to be used in decision making by the stakeholders. It is a useful tool for planning thus its accuracy is directly related to the success of the business



Pitt, S.-A. (2014). Internal audit quality: developing a quality assurance and improvement   program.