For the following statement below about internal controls over payroll, select whether they are true, false, of no importance and/or of no material importance.
Approving the wages and salary summary for payment helps to ensure that there is adequate segregation of duties.
Select ONE answer:
True
Of no importance
Of no material importance
False
Show your workings to arrive at your answer, and explain and justify your reasons:
At Alex Manufacturing Ltd, potential employees are interviewed by the production manager, Arthur, who then forwards successful candidates’ details, the job title and the rate of pay to the company’s personnel manager, Karen, for an employment offer to be made.
Which ONE of the following controls could be most effective at ensuring that wages are paid accurately?
Select ONE answer:
Payments should be authorised by a director before being submitted for processing
Employees should NOT be interviewed by the production manager, Arthur, and another responsible personnel official, i.e. Karen
Hours paid should be reconciled to timesheets
Reconciliations should be performed between the payroll and the company’s cash records
Show your workings to arrive at your answer, and explain and justify your reasons:
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
Not correct
Not correct
Correct – The key problem here is a lack of segregation of duties: Arthur, the production manager may be tempted to introduce non-existent employees into the system, leading to the misappropriation of company funds by way of wages payments for non-existent employees. Controls to curb this would therefore seek to verify that the employees being paid do in fact exist and have done work for the company. Authorisation by a director would not help because the director would not know whether the employees were legitimate. Reconciliation of payroll to cash records would not control the amounts included on the payroll in the first place.
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At Alex Manufacturing Ltd, potential employees are interviewed by the production manager, Arthur, who then forwards successful candidates’ details, the job title and the rate of pay to the company’s personnel manager, Karen, for an employment offer to be made.
Which ONE of the following controls could be most effective at ensuring that wages are paid accurately?
Select ONE answer:
Payments should be authorised by a director before being submitted for processing
Employees should be interviewed by the production manager, Arthur, and another responsible personnel official, i.e. Karen
Hours paid should NOT be reconciled to timesheets
Reconciliations should be performed between the payroll and the company’s cash records
Show your workings to arrive at your answer, and explain and justify your reasons:
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
Not correct
Correct – The key problem here is a lack of segregation of duties: Arthur, the production manager may be tempted to introduce non-existent employees into the system, leading to the misappropriation of company funds by way of wages payments for non-existent employees. Controls to curb this would therefore seek to verify that the employees being paid do in fact exist and have done work for the company. Authorisation by a director would not help because the director would not know whether the employees were legitimate. Reconciliation of payroll to cash records would not control the amounts included on the payroll in the first place.
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 1
Correct – The deficiency arises after the calculation of the payroll, so although it might expose errors in that calculation it is more likely to expose errors in the amount paid/general ledger.
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
Not correct
Not correct
Not correct
Correct – The deficiency arises when calculating pay (i.e., ensuring that the amounts on the payroll reflect the amount recorded on the timesheets), so would not directly affect the general ledger.
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