Client: Learning $($Pty$)$ Ltd$.$ Year$-$end: $31/12/2022$

Prepared by: DA Date prepared: $31/03/2023$ E$100$

Subject: Payroll cycle walkthrough

Learning $($Pty$)$ Ltd has $150$ employees who are all salaried staff and paid monthly.

During the year, several employees worked overtime and received an overtime rate of

$1\mathrm{.}5$ times their hourly rate. The number of employees increased from $110$ to $150,$ and

$10$ employees were terminated during the financial year ending $31$ December $2022.$

The following are controls put in place within the payroll cycle:

New Employee Payroll Process

After a successful interview with the potential new employee, the Human Resource

Manager, Harry Pather, performs the necessary reference checks and then requests

the potential employee to complete their personal information for record keeping. The

new employee completes the personal information on an electronic form and emails it

back to Harry Pather to check against the employee$$s supporting documents provided

and approves the form. The employee$$s supporting documents consist of copies of

their identity document, qualifications, bank confirmation, proof of address, and a letter

from SARS confirming the employee$$s tax reference number. After approval by Harry

Pather, the employee Masterfile is automatically updated. The electronic form has the

following details, which are all mandatory fields that must be completed before

successful submission:

$$ Name and surname

$$ Identity number

$$ Contact details

$$ Banking details

$$ Next of kin for emergency use

The employee contract is then drafted with the necessary signatures obtained from

Harry Pather, the employee, and the Head of the Institution, Peter Grey, and the

employee commences with a new role on a specified date per the contract. The

employee contract includes the annual salary package.

After the employee and employer sign the contract, Harry Pather emails the Financial

Manager, Henry Michel, to add the employee to the payroll system.

Timekeeping

The employees enter the building at the security turnstile using a fingerprint biometric

clock$-$in and clock$-$out system. The biometric data automatically updates the payroll

system with the hours worked. Regular working hours are from $8$ am to $5$ pm$,$ Monday

to Friday. Any hours worked outside of these times are determined as overtime by the

system, overtime gets automatically calculated by the payroll system.

Overtime is only paid to employees when both the employee and Harry Pather agree

on it via email.

On the $28$th of each month, Henry Michel runs the payroll report and does the

necessary checks to ensure overtime for the month is approved by Harry Pather; the

calculations for payroll were calculated correctly and are deemed reasonable. After he

has completed these checks, he emails the Directors of Learning $($Pty$)$ for final

approval.

Once the approval of the payroll report is received from the Directors, Henry Michel,

sends the approved payroll report to the Payroll Clerk, Timothy Banks, to load the

payments via the banking application. After Timothy loads the payments, approval to

pay the employees is requested via the banking app to Henry Michel, and final

approval is sent to one of the Directors.

Amendments to Payroll Masterfile

Henry Michel and Timothy Banks are the staff members who can amend the payroll

Masterfile for any changes made to payroll due to increases or bonuses and new or

terminated employees. Henry Michel reviews any payroll Masterfile amendments

made by Timothy Banks. The changes to the payroll Masterfile are approved by one

of the Directors.

The Masterfile amendments are sequentially numbered and stored.

$1\mathrm{.}1.$Based on the information presented in working paper E$100,$ formulate the test

of controls you would perform to test the payroll cycle of Learning $($Pty$)$ Ltd

that includes computerised controls.

$(30$ marks$)$