1. Carolina Company recently discovered that a payroll clerk had issued checks to nonexistent employees for several years and cashed the checks himself. The firm does not have any internal control procedures for its payroll operations. What specific controls might have led to the discovery of this fraud more quickly or discouraged the payroll clerk from even attempting the fraud?

2. Johnson Company has 20 employees. Some employees work in the office, others in the warehouse, and still others in the retail store. In the company's records, all employees are simply referred to as "general employees." Explain to management why this is not an acceptable practice.

3. Why should management be concerned about the accuracy and promptness of payroll tax deposits and payroll tax returns?

4. What is the significance to management of the experience rating system used to determine the employer's tax under the state unemployment insurance laws?