The audit senior on the audit of Frankel Factors is preparing the audit plan for the year ended 30 June 2017. The following notes relate to the payroll application system that went live on 1 January 2017.

1. The new payroll application is more complex than the old system, but its reporting function provides more detail. For example, the new application calculates leave, superannuation, payroll tax and work cover expenses, as well as the corresponding accruals.

2. Due to the brief time available to implement the new system, the previous application ceased operation on 31 December 2016 and the new application went live on 1 January 2017 without running parallel with the previous application. Staff training and testing of the new application was limited.

3. Access to the master files is restricted to the payroll supervisor and her deputy. Access to transaction files is restricted to payroll staff who are responsible for the processing of fortnightly and monthly pay.

Prior to the introduction of the new payroll application system, the payroll master and transaction files were kept in a separate database from the general ledger application. At the end of each month, the IT staff imported transaction data from the database into the general ledger. Management decided to upgrade the existing accounting system due to the frequent problems encountered by IT staff when importing data into the general ledger.

Required

(a) Based on the information above, explain two relevant concerns you may have about the payroll application’s integration with the general ledger application.

(b) Describe one IT application control that would ensure the accuracy of the salaries and wages expenses transaction.

(c) Describe one IT application control that would ensure the occurrence of the salaries and wages expenses transaction.

(d) Design and describe in detail appropriate tests of control that you would use to satisfy yourself about the effectiveness of these internal controls.