232 RASPBERRY

Direct control Test of controls

The company has a human Review job description between HR
resources (HR) department, and payroll departments to confirm
responsible for setting up all new the split of responsibilities with
joiners. regards to setting up new joiners.

This segregation of duties between Discuss member of payroll

HR and payroll departments which department the process for setting
reduce the risk of fictious up new joiners and for confirmation
employees being set up to the that the process is initiated by HR.
payroll system
This ensures occurrence of payroll
which will lead to payroll
overstatement.
Pre-printed forms are completed by Select a sample of new employees
HR for all new employees and, added to the payroll during the
once verified, a copy is sent to the year, review joiner forms for
payroll department for the evidence of compilation of all parts
employee to be set up for and that the information was
payment. verified as accurate and was
received by the payroll prior to
As payroll is unable to set up new being added to the system.
employee without the joiner form
by HR, then this reduce the risk of
fictious employees being set up to
payroll system.
This quarterly bonus is entered into Review the bonus listing for
the system by a clerk and each evidence of signature by the senior
entry is checked by a senior clerk clerk who checks for input errors.
for input errors prior to processing.
The senior clerk signs the bonus
listing as evidence of undertaking
this review.

This reduce the risk of input errors

resulting in misstatement of payroll
and over/underpayment of bonus
to employees.
Production employees are issued Observe the use of clock cards by
with clock cards and are required production employees when
to swipe their cards at the entering the power station and
beginning and end of their shift. ensure that this process is
This process is supervised by supervised by security staff.
security staff 24 hours a day.

This ensures that genuine

employees are only paid for hours
actually done, and reduce the risk
of employees being paid but not
completing their eight hours shift.
In addition, due to supervision with
security staff it’s unlikely that one
employee could sign on behalf of
other employees.
For production employees paid in Review invoices from security
cash, the necessary amount of company to Raspberry Co for
cash is delivered weekly from the delivery of cash.
bank by a security company.
Enquire of payroll clerks how cash
This reduces the risk of cash is being transferred for weekly pay
misappropriation and cash backets.
misstatement.
Two members of the payroll Observe the preparation of pay
department produce the pay packets to ensure that one
packets, one is responsible for member is responsible for
preparing them and the other preparing pay packets and other
checks the finished pay packets. check on them.
Both members of staff are required Review weekly payroll listing for
to sign the weekly payroll listing on signature by the two staff member.
completion of this task.

This is a segregation of duties

which prevent fraud and errors not
being identified on a timely basis.
On a quarterly basis, exception Review the exception report for
reports relating to changes to the evidence of review by the payroll
payroll standing data are produced director and follow up any
and reviewed by the payroll unexpected changes.
director.

This ensures that any unauthorized

amendments to the standing data
are identified and resolved on a
timely basis.

Control deficiency Control recommendation

The production supervisors Bonus should be determined by a
determine the amounts to be paid responsible official such as
and notify the payroll department. production director and should be
formulated based on written policy.
The production supervisor could Bonus should be communicated in
pay extra bonus for friends or written to the payroll.
family members, leading to
additional payroll expenses.
Payroll system automatically The gross to net pay calculation
calculates the gross and net pay should be recalculated by a senior
along with relevant deductions. member of payroll department and
These calculations are not compare to the results of payroll
checked. system. These calculations should
be signed as approved before
This increases the risk of payroll payment is processed.
system generating errors, resulting
in over/under calculated wages.
This would lead to extra payroll
costs or loss of employee goodwill.
Employees are entitled to take 28 Employees should be informed that
holiday days annually. Holiday they will not be able to take
request forms are required to be holiday without compilation of
completed and authorised by holiday request form with
relevant line managers, however, authorization from line manager.
this does not always occur.
Payroll clerks should not process
This could result in employees any holiday payment without
taking unauthorized leave, agreement to the authorized
resulting in production difficulties if holiday form.
an insufficient number of
employees are not present to
operate the powerplant.
In addition, this could result in an
overpayment of wages.
On a monthly basis, the senior The senior payroll manager should
payroll manager reviews the list of not be able to process changes to
bank payments and agrees this to the payroll system as well as
the payroll records prior to authorize payments.
authorising the payment. If any The authorization of bank transfer
errors are noted, the payroll senior should be undertaken by a
manager amends the records. responsible official, such as the
finance director, who should
There’s lack of segregation of evidence this authorization.
duties as one individual is
responsible for reviewing,
amending and authorizing the
bank transfer.
Therefore, there’s an increased risk
of errors or fraud as the senior
payroll could increase amount to
be paid to certain employees,
process payment and amends the
records.
The pay packets are then delivered All pay packets should be
to the production supervisors, who distributed by the payroll
distribute them to employees at department directly to employees
the end of the employees’ shift, as upon sight of clock cards and
they know each member of their identification as this confirms proof
production team. of identity

Production supervisor is not

sufficiently independent to
distribute pay packets. They could
adjust pay packets to increase
those of close friends and while
reducing other leading to increased
risk of fraud.
As there are no overtime costs, The monthly management
monthly management account accounts should be amended to
doesn’t analyse wages and include an analysis of wages and
salaries. salaries compared to budgeted
costs. These should be broken
Wages and salaries are significant down to each relevant department
expenses, and management needs and could also include an analysis
to understand why variances may of headcount number compared to
have arisen. budget.
This could occur in extra
employees being recruited which
were not budgeted for, or an
increase in wage pay out rates.
The board would need to monitor
wages and salaries costs as if they
are too high, then this would
impact the profitability of company.