Analysis and evaluation: Identify the control deficiencies in the payroll process for The Vane Corporation. Recommend the changes necessary to improve the control structure. Arrange your answer in the following columnar format:

The Vane Corporation is a manufacturing concern that has been in business for the past 18 years. During this period, the company has grown from a very small family-owned operation to a medium-sized manufacturing concern with several departments. Despite this growth, a substantial number of the procedures employed by Vane have been in effect since the business was started. Just recently, Vane has computerized its payroll function.

The payroll function operates in the following manner. Human resources is responsible for hiring or firing workers. HR also maintains an employee master file with the employee number, pay rates, information about the department in which an employee works, and payroll withholding information. Only the HR manager and two of her assistants have the ability to access and change the employee master file database. The HR manager reviews a report of all changes weekly. Each worker has a personal swipe card to record hours worked electronically. Each Friday evening, the factory foreman reviews an electronic file of hours worked and approves the hours or raises questions with employees about what has been recorded. This information is submitted to payroll by Monday at noon for processing.

In payroll, the approved time worked is imported electronically to process weekly payroll. Later on Monday, a final payroll file is sent to the company controller for approval. Once the controller approves the payroll, direct deposits of payroll are made to employee bank accounts.

Further analysis of the payroll function reveals the following:

? A worker?s gross wages should not exceed $1,300 per week.

? Raises never exceed $3.55 per hour for the factory workers.

? No more than 20 hours of overtime are allowed each week.

? The factory employs 150 workers in ten departments.

The following problems surfaced when the new payroll system was placed in operation:

1. A worker received a direct deposit for $1,531.80 when it should have been $153.81. It was determined that the wage rate was overstated by a magnitude of 10 because it was entered incorrectly in the payroll system.

2. One worker complained that a direct deposit was not made to his account, and this error was not detected. As it turned out, the payment was made to another individual because the wrong bank account number was on file.

3. One worker received a paycheck for an amount considerably larger than she should have. Investigation revealed that a worker was paid $21.75 per hour rather than $12.75 per hour because of an input error when changing the employee?s wage rate on the master file.

4. In processing non-routine changes, an HR assistant included a pay rate increase for one of his friends in the factory. This was discovered by chance when a foreman was reviewing charges to his department.

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Control Deficiencies Recommendations