The Banzai company operates from four locations together with a Head office where all administrative processes are carried out. All locations are networked together with a server placed at each location to enable fast direct communication and data transfer. Access to all files on the Head Office server is permitted by each of the other locations; although it is the responsibility of the site manager to restrict this access as he considers appropriate.
All staff are paid on a salaried basis. There are currently ten staff at the Head Office plus five at each of the locations. The payroll is managed at Head Office by the Head of Office Services who relies on monthly input from each of the site managers as follows.
• All employees have to submit a timesheet at the end of each month showing hours worked during the month.
• If they have worked less than the minimum hours of 30 then a reason for this has to be supplied by the employee and approved by the site manager.
• If such absence was not for an authorised reason then the appropriate deduction is made from the salary amount.
• The timesheet should also record sicknesses, holidays or other approved absences.
• At the end of each month the site manager has to complete a summary form detailing any sicknesses, holidays or other absences. All absences must be supported by a form explaining reasons and authorised by the manager. All sicknesses must be accompanied by a Doctor’s certificate if appropriate.
• The site Manager is also responsible for recruitment and staff leavers, and must inform the Office Manager of all such instances so that the personnel records can be set up.
• Recruitment of new staff should only take place following authorisation from the Managing Director who is located at Head Office.
• All monthly input to the Head of Office Services is via email from each of the site managers and from the individual employees.
You are an audit senior working for Tickett & Run on the audit of Banzai and have been asked by the Audit Manager to complete the audit of salaries.
a) What are the control objectives for the salaries system?
b) Outline what you perceive the risks to be in the audit of the salaries system.
c) List the tests of control that you would perform as part of the audit testing on the Salaries system.
d) List four substantive tests that you would perform as part of the audit testing on the salaries system.