Oasis Dahal is an assurance manager with PWWC and it has just been decided to allocate him to the audit of Woolworths Ltd. Woolworths Ltd operates a chain of gourmet food stores throughout Australia. Each store maintains its own payroll. Due to the nature of the business, most of the employees work shift work and everyone is paid in cash. The payroll records are kept on the in-house computer system maintained by Woolworths Ltd. Processing is batch oriented, and the payroll data are directly input at each store. Physical access to the computer room, which is located at Head Office, is restricted to computer operations personnel. The system was developed in accordance with formal system development procedures. The payroll application is password protected at several levels. The system checks that the employee number entered is a valid employee on the system. The assistant enters the details and compares the hours worked as accepted by the system to the total calculated manually. The payroll is prepared by the paymaster in each store based on timesheets approved by departmental managers. All departmental lists are signed by the paymaster, who then passes the list to an assistant who totals the list and enters the details in the computer system. The details recorded for each employee include the employees staff number, name, pay period, hours worked, leave taken, overtime hours, any expenses incurred and the date of input. Rates are applied to each employees hours to determine the total payment. Tests are applied during processing to ensure that the hours worked are within predefined limits and that only one payment is processed for each employee based on the employee number. Rates of earnings and deductions are held in tables and updated as required by the administrative payroll assistant. An audit trail showing the before and after image of master file changes is produced and reviewed by the paymaster. The system also produces pay slips and a payroll master listing for each payroll run. The payroll master listing is reconciled by the paymaster to a store totally manually added from the departmental listings. A cheque is drawn for the total amount and individuals are personally paid by each store paymaster in cash. Each employee signs the master listing on receipt of their pay packet. A video is made of employees collecting their pay and it is stored for one year.

a) Identify 4 internal controls present within the payroll system of Woolworths Ltd and explain why they are a control. (4 Marks)