A power plant run by HIGH VOLTAGE generates electricity seven days a week, twenty-four hours a day. The business's fiscal year ends on December 31, 2021. You work as an audit manager for HIGH VOLTAGE's auditor, CLEVERY FIRM. You are examining the papers outlining HIGH VOLTAGE's payroll system after the interim audit is over.

Systems notes payroll

Over 250 people are employed by HIGH VOLTAGE, with over 70% of them working in the power station. There are three shifts every day, and each shift lasts for eight hours. Weekly cash payments are made to the production staff. The remaining 30% of workers are paid monthly by bank transfer and perform non-production duties at the corporate headquarters.

The company's human resources (HR) division is in charge of onboarding all new employees. Pre- printed forms are completed by HR for all new employees and, once verified, a copy is sent to the payroll department for the employee to be set up for payment. The employee number is included on this form because payroll cannot register new hires without it. HIGH VOLTAGE implemented a discretionary bonus for production staff that is paid every three months to reward punctual attendance for all shifts. The payroll department is informed of the amounts to be paid by the production supervisors. This quarterly bonus is entered into the system by a clerk and each entry is checked by a senior clerk for input errors prior to processing. The senior clerk signs the bonus listing as evidence of undertaking this review.

Employees in the production department receive clock cards, which they must swipe at the start and completion of each shift. Security personnel are on duty around-the-clock to watch over this operation. Each card identifies the employee number and connects to a report on the hours worked generated by the payroll system, which computes the gross and net pay as well as any applicable deductions automatically. These figures are not checked.

In addition to tax deductions, some employees' income is deducted for other reasons, like paying back government student loans. All employers have a statutory obligation to remit funds on a timely basis and to maintain accounting records which reconcile with annual loan statements sent by the government to employers. At HIGH VOLTAGE student loan deduction forms are completed by the relevant employee and payments are made directly to the government until the employee informs HR that the loan has been fully repaid.

The payroll director creates and examines exception reports regarding changes to the payroll standing data on a quarterly basis. Employees do not work overtime. Every year, employees are

allowed to take 28 days off. Forms for vacation requests must be filled out and approved by the appropriate line managers, although this does not always happen.

On a monthly basis, for employees paid by bank transfer, the senior payroll manager reviews the list of bank payments and agrees this to the payroll records prior to authorising the payment. If any errors are noted, the payroll senior manager amends the records.

For production employees paid in cash, the necessary amount of cash is delivered weekly from the bank by a security company. Two members of the payroll department produce the pay packets, one is responsible for preparing them and the other checks the finished pay packets. Both members of staff are required to sign the weekly payroll listing on completion of this task. The pay packets are then delivered to the production supervisors, who distribute them to employees at the end of the employees shift, as they know each member of their production team.

Monthly management accounts are produced which detail variances between budgeted amounts and actual. Revenue and key production costs are detailed, however, as there are no overtime costs, wages and salaries are not analysed.

a, Identify at least 5 control deficiencies and propose the recommendation (suggested

control) for each of the deficiency.