Day: March 6, 2026

Alex Manufacturing Ltd is a company that is expanding rapidly and is regularly taking on new employees.

The payroll is processed in-house in the accounts department using a desktop PC.

The financial controller, Lucy, is worried that fictitious employees could be included on the payroll by a dishonest employee from the accounts department.

Which ONE of the following internal controls is most likely to prevent this from happening?

Select ONE answer:

1. Payroll standing data is periodically printed out and checked on a line-by-line basis to independently held employee details
2. Pre-authorisation of all amendments to payroll standing data by an independent official
3. Supervision of the wage payout by an independent official
4. Use of hierarchical passwords over standing data files

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 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Use of hierarchical passwords over standing data files – this will allow the company to restrict access to standing data files to a responsible official, yet still allow other employees to process the wages. This means that an unscrupulous employee cannot access the part of the system where new employees would be added and hence will prevent the fraud. This is therefore the correct answer.

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