16-33
(Control activities in payroll processing) As part of the audit of Manor
Company, you are assigned to review and test the payroll transactions of the
Galena plant. Your tests show
that
all numerical items were accurate. The proper hourly rates were used, and the
wages
and
deductions were calculated correctly. The payroll register was properly footed,
totaled,
and
posted.
Various
plant personnel were interviewed to ascertain the payroll procedures being
used
in the department. You determine that
1.
The payroll clerk receives the time cards from the various department
supervisors at the
end
of each pay period, checks the employee’s hourly rate against information
provided
by
the personnel department, and records the regular and overtime hours for each
employee.
2.
The payroll clerk sends the time cards to the plant’s data processing
department for
compilation
and processing.
3.
The data processing department returns the time cards with the printed checks
and payroll
register
to the payroll clerk on completion of the processing.
4.
The payroll clerk verifies the hourly rate and hours worked for each employee
by comparing
the
detail in the payroll register to the time cards.
5.
If errors are found, the payroll clerk voids the computer-generated check,
prepares
another
check for the correct amount, and adjusts the payroll register accordingly.
6.
The payroll clerk obtains the plant signature plate from the accounting
department and
signs
the payroll checks.
7.
An employee of the personnel department picks up the checks and holds them
until
they
are delivered to the department supervisors for distribution to the employees.
Required
a.
Identify the shortcomings in the payroll procedures used in the payroll
department of
the
Galena plant and suggest corrective actions.
b. Identify the
weaknesses, if any, that you believe are material and the reasons why.
16-35
(Potential misstatements/tests of controls—payroll) The following questions
are included
in
the internal control questionnaire on control procedures for payroll
transactions in the
Pena
Company:
1.
Are pay rates, payroll deductions, and terminations authorized by the personnel
department?
2.
Are time clocks and clock cards used?
3.
Is there supervisory approval of time worked by each employee?
4.
Are payroll checks signed and distributed by treasurer office personnel?
5.
Is there internal verification of payroll checks with payroll register data?
6.
Are unclaimed wages controlled by a treasurer’s office employee?
7.
Is access restricted to personnel and employee earnings master files?
8.
Are hirings authorized by personnel department?
9.
Is time clock punching supervised?
10.
Is responsibility assigned for the timely filing of payroll tax returns and
payment of
payroll
taxes?
Required
a.
Identify a misstatement that may occur if a No answer is given to each
question.
b.
Identify a possible test of controls assuming a Yes answer is given to
each question. (Present
your
answers in tabular form using separate columns
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