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Question Onne

ABC Co operates a hotel chain with over 250 permanent employees and is preparing for an interim audit of its payroll system. The payroll process has several deficiencies, including lack of checks on overtime calculations, insufficient authorization for overtime pay, and inadequate verification of overtime reports. Recommendations for controls include implementing checks on payroll calculations, requiring pre-authorization for all overtime, and ensuring thorough review of overtime reports by payroll clerks.

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Abdlle Osman
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9 views1 page

Question Onne

ABC Co operates a hotel chain with over 250 permanent employees and is preparing for an interim audit of its payroll system. The payroll process has several deficiencies, including lack of checks on overtime calculations, insufficient authorization for overtime pay, and inadequate verification of overtime reports. Recommendations for controls include implementing checks on payroll calculations, requiring pre-authorization for all overtime, and ensuring thorough review of overtime reports by payroll clerks.

Uploaded by

Abdlle Osman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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QUESTION ONNE

ABC Co operates a chain of hotels across the country. Trombone employs in excess of 250
permanent employees and its year end is 31 August 2014. You are the audit supervisor of Viola
& Co and are currently reviewing the documentation of Trombone’s payroll system, detailed
below, in preparation for the interim audit. Trombone’s payroll system
Permanent employees work a standard number of hours per week as specified in their
employment contract. However, when the hotels are busy, staff can be requested by management
to work additional shifts as overtime. This can either be paid on a monthly basis or taken as days
off. Employee’s record any overtime worked and days taken off on weekly overtime sheets
which are sent to the payroll department. The standard hours per employee are automatically set
up in the system and the overtime sheets are entered by clerks into the payroll package, which
automatically calculates the gross and net pay along with relevant deductions.
These calculations are not checked at all. Wages are increased by the rate of inflation each year
and the clerks are responsible for updating the standing data in the payroll system.
Employees are paid on a monthly basis by bank transfer for their contracted weekly hours and
for any overtime worked in the previous month. If employees choose to be paid for overtime,
authorization is required by department heads of any overtime in excess of 30% of standard
hours. If employees choose instead to take days off, the payroll clerks should check back to the
‘overtime worked’ report; however, this report is not always checked.
The ‘overtime worked’ report, which details any overtime recorded by employees, is run by the
payroll department weekly and emailed to department heads for authorization. The payroll
department asks department heads to only report if there are any errors recorded.
Required

a) Identify and explain eight deficiencies


b) Recommend a control to address each of these deficiencies
c) Test of control

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