Day: March 13, 2026

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:

1. Payments should be authorised by a director before being submitted for processing
2. Employees should NOT be interviewed by the production manager, Arthur, and another responsible personnel official, i.e. Karen
3. Hours paid should be reconciled to timesheets
4. 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

1. Not correct
2. Not correct
3. 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.
4. Not correct

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