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You have been hired to evaluate the payroll system for the Skip-Rope Manufacturing Company.




15.3;You have been hired to evaluate the payroll system for the Skip-Rope Manufacturing Company. The company processes its payroll in-house. Use Table 15-1 as a reference to prepare a list of questions to evaluate Skip-Rope?s internal control structure as it pertains to payroll processing for its factory employees. Each question should be phrased so that it can be answered with either a yes or a no, all ?no? answers should indicate potential internal control weaknesses. Include a third column listing the potential problem that could arise if that particular control were not in place.;(Table Formatted in Attachment);TABLE 15-1 Threats and Controls in the Payroll/HRM Cycle;Activity Threat Controls (first number refers to the corresponding threat);General issues throughout entire HRM/payroll cycle ? 1. Inaccurate or invalid master data;? 2. Unauthorized disclosure of sensitive information;? 3. Loss or destruction of data;? 4. Hiring unqualified or larcenous employees;? 5. Violations of employment laws ? 1.1 Data processing integrity controls;? 1.2 Restriction of access to master data;? 1.3 Review of all changes to master data;? 2.1 Access controls;? 2.2 Encryption;? 3.1 Backup and disaster recovery procedures;? 4.1 Sound hiring procedures, including verification of job applicants? credentials, skills, references, and employment history;? 4.2 Criminal background investigation checks of all applicants for finance-related positions;? 5.1 Thorough documentation of hiring, performance evaluation, and dismissal procedures;? 5.2 Continuing education on changes in employment laws;Update payroll master data ? 6. Unauthorized changes to payroll master data;? 7. Inaccurate updating of payroll master data ? 6.1 Segregation of duties: HRM department updates master data, but only payroll department issues paychecks;? 6.2 Access controls;? 7.1 Data processing integrity controls;? 7.2 Regular review of all changes to master payroll data;Validate time and attendance data ? 8. Inaccurate time and attendance data ? 8.1 Source data automation for data capture;? 8.2 Biometric authentication;? 8.3 Segregation of duties (reconciliation of job-time tickets to time cards);? 8.4 Supervisory review;Prepare payroll ? 9. Errors in processing payroll ? 9.1 Data processing integrity controls: batch totals, cross-footing of the payroll register, use of a payroll clearing account and a zero-balance check;? 9.2 Supervisory review of payroll register and other reports;? 9.3 Issuing earnings statements to employees;? 9.4 Review of IRS guidelines to ensure proper classification of workers as either employees or independent contractors;Disburse payroll ? 10. Theft or fraudulent distribution of paychecks ? 10.1 Restriction of physical access to blank payroll checks and the check signature machine;? 10.2 Restriction of access to the EFT system;? 10.3 Prenumbering and periodically accounting for all payroll checks and review of all EFT direct deposit transactions;? 10.4 Require proper supporting documentation for all paychecks;? 10.5 Use of a separate checking account for payroll, maintained as an imprest fund;? 10.6 Segregation of duties (cashier versus accounts payable, check distribution from hiring/firing, independent reconciliation of the payroll checking account);? 10.7 Restriction of access to payroll master database;? 10.8 Verification of identity of all employees receiving paychecks;? 10.9 Redepositing unclaimed paychecks and investigating cause;Disburse payroll taxes and miscellaneous deductions ? 11. Failure to make required payments;? 12. Untimely payments;? 13. Inaccurate payments ? 11.1 Configuration of system to make required payments using current instructions from IRS (Publication Circular E);? 12.1 Same as 11.1;? 13.1 Processing integrity controls;? 13.2 Supervisory review of reports;? 13.3 Employee review of earnings statement


Paper#24351 | Written in 18-Jul-2015

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