Homework 7. How to fix payroll control problems at a nonpublic firm (False claims for working hours) This case exposes overpayment of wages to medical workers who make false claims for hours worked. A part-time labor agency (Temp Med Inc.) assigned nurse Mary to work at St. Lucas. a local non-profit hospital in Southern California. This labor agency paid Mary first, then submitted supporting documents to the hospital and charged it for wage and benefits. Mary reported her payroll hours on TempMed's time sheet. Each weekly time sheet has approval signature of a St. Lucas nursing shift supervisor. Interestingly, this shift supervisor had been fired by St. Lucas several month before the working periods as reported on Mary's time sheet. Mary usually worked two days per week, but submit time sheet for 40 hours per week. Her hourly rate was $30 per hour, excluding any benefits. Therefore, incorrect time sheets cost the hospital $720 per week (excluding benefits cost). Since Mary was assigned to St. Lucas Hospital for 20 weeks in 2015, she had overcharged the hospital by $14,400 FYI, the following info or documents are available: Each hospital section keeps ward shift logs. Logs are sign-in sheets indicating on-duty nurses at all times. When nurses go on and off duty. they must sign in and sign out accordingly. St. Lucas maintains personnel records showing the period of employment of its nurses, supervisors, and other employees. You also obtain control information from St. Lucas' accounting department: Payroll controls start with a hiring authorization. Full-time employees report to the HR department with their copy of contract. They stay on the HR department records and are paid based on either monthly time sheet or labor contract. The authorization for part-time employees is a contract, which specifies nursing time, condition of employment terms and reimbursement rate. Control record of attendance (hospital ward shift log) should be kept in either hard copy or electronic systems. Supervisors should approve time sheets which are used by the HR department to prepare paychecks. If part-time employees are contracted through a labor agency (such as TempMed), approved time sheets must be submitted as supporting documents for agency billing Required: You are a new promising senior auditor assigned to the St. Lucas audit. Your manager told you that your payroll audit objective is to obtain evidence to ensure that wages are paid to valid employees for actual time worked at authorized pay rates. 1) Please propose several audit procedures Vou would perform in this case (both control tests and substantive tests). 2) Please identify the internal control weakness at St. Lucas. Please list a few tests that are likely to detect the overpayment of wages for temporary medical workers. Homework 7. How to fix payroll control problems at a nonpublic firm (False claims for working hours) This case exposes overpayment of wages to medical workers who make false claims for hours worked. A part-time labor agency (Temp Med Inc.) assigned nurse Mary to work at St. Lucas. a local non-profit hospital in Southern California. This labor agency paid Mary first, then submitted supporting documents to the hospital and charged it for wage and benefits. Mary reported her payroll hours on TempMed's time sheet. Each weekly time sheet has approval signature of a St. Lucas nursing shift supervisor. Interestingly, this shift supervisor had been fired by St. Lucas several month before the working periods as reported on Mary's time sheet. Mary usually worked two days per week, but submit time sheet for 40 hours per week. Her hourly rate was $30 per hour, excluding any benefits. Therefore, incorrect time sheets cost the hospital $720 per week (excluding benefits cost). Since Mary was assigned to St. Lucas Hospital for 20 weeks in 2015, she had overcharged the hospital by $14,400 FYI, the following info or documents are available: Each hospital section keeps ward shift logs. Logs are sign-in sheets indicating on-duty nurses at all times. When nurses go on and off duty. they must sign in and sign out accordingly. St. Lucas maintains personnel records showing the period of employment of its nurses, supervisors, and other employees. You also obtain control information from St. Lucas' accounting department: Payroll controls start with a hiring authorization. Full-time employees report to the HR department with their copy of contract. They stay on the HR department records and are paid based on either monthly time sheet or labor contract. The authorization for part-time employees is a contract, which specifies nursing time, condition of employment terms and reimbursement rate. Control record of attendance (hospital ward shift log) should be kept in either hard copy or electronic systems. Supervisors should approve time sheets which are used by the HR department to prepare paychecks. If part-time employees are contracted through a labor agency (such as TempMed), approved time sheets must be submitted as supporting documents for agency billing Required: You are a new promising senior auditor assigned to the St. Lucas audit. Your manager told you that your payroll audit objective is to obtain evidence to ensure that wages are paid to valid employees for actual time worked at authorized pay rates. 1) Please propose several audit procedures Vou would perform in this case (both control tests and substantive tests). 2) Please identify the internal control weakness at St. Lucas. Please list a few tests that are likely to detect the overpayment of wages for temporary medical workers
