Payroll Application Control Using this supplemental information, analyze the flowchart on the following page.

• The personnel department determines the wage rate of all employees. To start the process, personnel sends the payroll coordinator, George Jones, an authorization form in order to add an employee to the payroll. After Jones enters this information into the system, the computer automatically determines the overtime and shift differential rates for the individual, updating the payroll master files.

• Employees use a time clock to record the hours worked. Every Monday morning, George Jones collects the previous week’s time cards and begins the computerized processing of payroll information to produce paychecks the following Friday.

Jones then reviews the time cards to ensure that the hours worked are correctly totaled; the system determines overtime and/or any shift differential.

• Jones performs all other processes displayed on the flowchart. The system automatically assigns a sequential number to each payroll check produced. The check stocks are stored in a box next to the computer printer to provide immediate access. After the checks are printed, an automatic check-signing machine signs them with an authorized signature plate that Jones keeps locked in a safe.

• After the check processing is completed, Jones distributes the checks to the employees, leaving the checks for the second-

and third-shift employees with the appropriate shift supervisor. Jones then notifies the data processing department that he is finished with his weekly processing, and data processing makes a backup of the payroll master for storage in the computer room.

Required:
Identify and describe:

a. Areas in the payroll processing system where the internal controls are inadequate.

b. Two areas in the payroll system where the system controls are satisfactory.

Transcribed Image Text:

Personnel Prepares Original Problem 14: Payroll Application Control Payroll information Authorization Form Employee Punches Time Clock Authorization Post Payroll Information Form Calculate Overtime and Shift Differential Rates Payroll Master File Employees' Time Cards Database Backup Review Time Cards for Accuracy Prepare Employee Payroll No Review Weekly Payroll Register on Monitor Does Payroll Register Match Time Cards? Payroll Register Yes Process Payroll Checks Paychecks Prepare Journal Entry Distribute to Employees General Ledger