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Week Two
ASSIGNMENTS
a. Comprehensive Questions 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.
ICMA(adapted)
b. Comprehensive Questions 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 for each part.)