Certified Government Auditing Professional (CGAP) Practice Exam

In assessing an audit finding, what is crucial when evaluating controls for payroll accuracy?

1. Condition and criteria

2. Criteria, condition and effect

3. Criteria, condition, effect, and cause

4. Effects only

The correct answer is: Criteria, condition, effect, and cause

In evaluating controls for payroll accuracy, it is essential to consider multiple components that contribute to understanding the audit finding fully. Criteria, condition, effect, and cause provide a comprehensive framework for analysis. The criteria refer to the standards or benchmarks that the payroll processes are expected to meet. This might include regulatory requirements, organizational policies, or best practices that establish the expected level of accuracy and integrity in payroll. The condition pertains to the current state of the payroll processes—essentially what is being observed or assessed during the audit. This could highlight any discrepancies or irregularities in how payroll is processed. The effect describes the impact of the condition in relation to the criteria. It outlines the consequences of any inaccuracies found, such as financial loss, reputational damage, legal implications, or operational inefficiencies resulting from these payroll errors. Lastly, the cause identifies the root reasons behind the discrepancies. This understanding is vital, as it helps in formulating effective recommendations for improving controls to prevent similar issues in the future. Considering all four elements together provides a holistic view of the situation. This ensures that corrective actions address not just the symptoms (the inaccuracies) but also the underlying issues that led to the finding, ultimately leading to enhanced payroll accuracy and reliability.