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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

While auditing statutory deductions in payroll at Gomti Foods Ltd, the internal auditor finds that employee contributions to provident fund were deducted from salaries each month but deposited with the authorities after a delay of several months. What is the most appropriate audit conclusion?

The delay is a statutory non-compliance and a financial risk that the internal auditor should report, stating the amount involved and recommending corrective action. Deducted contributions are held in trust and must be deposited on time; correct payslip disclosure does not remove the default or its liability for interest and damages.

  1. AIt is only a timing difference with no compliance impact
  2. BIt is a statutory non-compliance and a financial risk, to be reported with the amount involved and recommended remedial actionCorrect
  3. CIt is acceptable if the deduction is correctly shown in the payslip
  4. DIt concerns only the external auditor and not internal audit

Explanation

Amounts deducted from employees are held in trust and must be deposited within the statutory time. Delay attracts interest and damages and may invite penal consequences. Internal audit covers compliance and should report the delay with the quantum and corrective steps; showing it in payslips does not cure it.

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