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1 . You are the audit senior of Blair & Co and your team has just completed the interim audit of Chuck Industries Sdn Bhd
You are the audit senior of Blair & Co and your team has just completed the
interim audit of Chuck Industries Sdn Bhd whose yearend is January
You are in the process of reviewing the systems testing completed on
the payroll cycle, as well as preparing the audit programmes for the final audit.
Chuck Industries manufactures lights and the manufacturing process is
predominantly automated; however, there is a workforce of employees
who monitor the machines, as well as approximately employees who work
in sales and administration. The company manufactures hours a day,
days a week. The payroll system operates as follows.
Factory workforce
The company operates three shifts every day with employees working
eight hours each. They are required to clock in and out using an
employee swipe card, which identifies the employee number and links
into the hours worked report produced by the computerised payroll
system. Employees are paid on an hourly basis for each hour worked.
There is no monitoringsupervision of the clocking inout process.
Wages to be paid to the workforce.
On a weekly basis, the payroll department calculates the wages. This
is calculated based on the hours worked report multiplied by the hourly
wage rate, with appropriate tax deductions. These calculations are not
checked by anyone as they are generated by the payroll system.
During the year the hourly wage was increased by the human
resources HR department and this was notified to the payroll
department verbally.
Each Friday, the payroll department prepares the pay packets and
physically hands these out to the workforce, who operate the morning
and late afternoon shifts, upon production of
identification. The pay packets for night shift workers are given to the
factory supervisor to
distribute. If any night shift employees are absent on pay day then the
factory supervisor keeps these wages and returns them to the payroll
department on Monday.
Sales and administration staff
The sales and administration staff are paid monthly by bank transfer.
Employee numbers do fluctuate and during July two administration
staff joined; however, due to staff holidays in the HR department, they
delayed informing the payroll department, resulting in incorrect salaries
being paid out.
Required
Identify and explain FIVE DEFICIENCIES of Chuck Industries Co's payroll
system and provide a recommendation to address each of these deficiencies.
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