$($ Directions

Read and critically analyze the Frankel Factors case study associated with C$7\mathrm{.}2$ in the course text and respond to the following questions using information from Chapter $7.$

You are also recommended to read the description of a payroll audit provided in Chapter $12.$ Refer to Appendix $12$A$,$ sections $12\mathrm{.}9-12\mathrm{.}12.$

Briefly discuss the nature of the payroll process and its importance within any organization.

Describe $2-3$ major risks for the payroll process in any organization and explain how these risks relate to relevant assertions.

Based on the information presented for Frankel Factors, explain two concerns about the payroll application's integration with the general ledger application.

Describe one IT application control Frankel Factors could use to ensure the accuracy of the salaries and wages expenses transaction.

Describe one IT application control Frankel Factors could use to ensure the occurrence of the salaries and wages expenses transaction.

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

Frankel Factors

Question C$7\mathrm{.}2$ is based on the following case.

The audit senior on the audit of Frankel Factors is preparing the audit plan for the year ended June $30,2026.$ The following notes relate to the payroll application system that went live on January $1,2026$:

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, pension, payroll tax, and employee benefit expenses, as well as the corresponding accruals.

Due to the brief time available to implement the new system, the previous application ceased operation on December $31,2025,$ and the new application went live on January $1,2026,$ without running parallel with the previous application. Staff training and testing of the new application was limited$.$

Access to the master files is restricted to the payroll supervisor and her assistant. Access to transaction files is restricted to payroll staff who are responsible for the processing of bi$-$weekly and monthly pay.

Prior to the introduction of the new payroll application system, the payroll master file 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.

C$7\mathrm{.}2($LO $1,$ An icon reads, Challenging frayroll controls

$1.$ Briefly discuss the nature of the payroll process and its importance within any organization.

$2.$ Describe $2-3$ major risks for the payroll process in any organization and explain how these risks relate to relevant assertions.

$3.$ Analysis: Based on the information above, explain two concerns about the payroll application's integration with the general ledger application.

$4.$ Analysis: Describe one IT application control to ensure the accuracy of the salaries and wages expenses transaction.

$5.$ Analysis: Describe one IT application control to ensure the occurrence of the salaries and wages expenses transaction.

$6.$ Evaluation: Design and describe in detail appropriate tests of controls you would use to satisfy yourself about the effectiveness of these internal controls.