international auditing: assurance & advisory services 4th edition

CASES CASE 1 MVF Company manufactures engine parts for lawn mowers, snow blowers, and other types of yard care equipment. The company employs approximately 300 production employees. Production employees alternate back and forth between two shifts and are sometimes asked to work overtime. The payroll employee then: Prints the payroll register and payro Separates the checks into a valid bat those that were included in the error Uses the results of the payroll check employee earrings master file. Prepares the kly payroll journal the entry to t eral ledger. Notifies the manager that th ing of payroll tions has been The payroll managerepares a back earnings master file, which is stored o computer room and backed up in a clo MVF'S CAE has asked Alyssa Woreshard, a first-year internal auditor, to gather information about the con- trols over the company's production payroll process, Woreshard reviewed the process, interviewed selected personnel, and documented the following information about the process. The personnel department prepares a personnel action form when a production employee is hired or termi- nated. Action forms also are used to document person- nel changes such as changes in pay rates, deductions, employee names, employee addresses, etc. A personnel department employee keys the information from the action forms into the computer each week to update the personnel master file. The valid and invalid batches of payr directly to MVF's treasurer. The tre number of valid checks received with time cards emailed by the production the valid checks, and shreds the invali surer stores the signed checks in the given to the production supervisors Friday. If an employee is absent when tributed, the supervisor returns the u the treasurer who keeps it in the safe comes to get it. A. Based on the information present ing into consideration both manu controls, describe the: 1. Control strengths in MVF Com process. Production employees use a time clock to record the hours they work. At the end of each week, production supervisors collect the time cards, verify the number of hours worked for each employee, and document the total number of hours worked on each employee's time card. Each supervisor also counts the number of time cards collected and emails the count to MVF's treasurer. Every Monday morning, a payroll employee collects the previous week's time cards from the production super- visors, sorts them by employee number, recalculates the total hours on each time card, keys the data from the time cards into the computer, and processes the production payroll. The system automatically assigns a sequential number to each payroll check produced. Blank checks are stored in a box next to the printer for immediate access Controls are imbedded in the payroll application software to detect invalid employee numbers, unreason- ably high numbers of hours worked, etc. The computer also determines whether overtime has been worked or a shift differential is required. Invalid data is printed on an error listing, 2. Control deficiencies in MVF Co process. B. MVF Company's senior managem CAE, realizes that the company's needs to be upgraded. 1. Brainstorm ideas as to how the more effectively leverage IT to i payroll process. 2. Discuss the risk and control im ideas generated in B.1. 7-32 INTERNAL AUDITING: ASSURANCE & ADVISORY SERVICES CASES CASE 1 MVF Company manufactures engine parts for lawn mowers, snow blowers, and other types of yard care equipment. The company employs approximately 300 production employees. Production employees alternate back and forth between two shifts and are sometimes asked to work overtime. The payroll employee then: Prints the payroll register and payro Separates the checks into a valid bat those that were included in the error Uses the results of the payroll check employee earrings master file. Prepares the kly payroll journal the entry to t eral ledger. Notifies the manager that th ing of payroll tions has been The payroll managerepares a back earnings master file, which is stored o computer room and backed up in a clo MVF'S CAE has asked Alyssa Woreshard, a first-year internal auditor, to gather information about the con- trols over the company's production payroll process, Woreshard reviewed the process, interviewed selected personnel, and documented the following information about the process. The personnel department prepares a personnel action form when a production employee is hired or termi- nated. Action forms also are used to document person- nel changes such as changes in pay rates, deductions, employee names, employee addresses, etc. A personnel department employee keys the information from the action forms into the computer each week to update the personnel master file. The valid and invalid batches of payr directly to MVF's treasurer. The tre number of valid checks received with time cards emailed by the production the valid checks, and shreds the invali surer stores the signed checks in the given to the production supervisors Friday. If an employee is absent when tributed, the supervisor returns the u the treasurer who keeps it in the safe comes to get it. A. Based on the information present ing into consideration both manu controls, describe the: 1. Control strengths in MVF Com process. Production employees use a time clock to record the hours they work. At the end of each week, production supervisors collect the time cards, verify the number of hours worked for each employee, and document the total number of hours worked on each employee's time card. Each supervisor also counts the number of time cards collected and emails the count to MVF's treasurer. Every Monday morning, a payroll employee collects the previous week's time cards from the production super- visors, sorts them by employee number, recalculates the total hours on each time card, keys the data from the time cards into the computer, and processes the production payroll. The system automatically assigns a sequential number to each payroll check produced. Blank checks are stored in a box next to the printer for immediate access Controls are imbedded in the payroll application software to detect invalid employee numbers, unreason- ably high numbers of hours worked, etc. The computer also determines whether overtime has been worked or a shift differential is required. Invalid data is printed on an error listing, 2. Control deficiencies in MVF Co process. B. MVF Company's senior managem CAE, realizes that the company's needs to be upgraded. 1. Brainstorm ideas as to how the more effectively leverage IT to i payroll process. 2. Discuss the risk and control im ideas generated in B.1. 7-32 INTERNAL AUDITING: ASSURANCE & ADVISORY SERVICES