Question 1 (8 points) PAYROLL INTERNAL CONTROL WEAKNESSES 8 marks REQUIRED:

With respect to the payroll process at Cheong Bakery, identify 4 (four) weaknesses in Internal Control and explain WHY the practice is a weakness.

SITUATION: CHEONG BAKERY Fang Cheong is the owner of Cheong Bakery. The company has 20 full time employees who work in production and administrative functions (including Accounting and Human Resources). In addition to the full time staff, Cheong Bakery uses a group of 30 "On-Call" workers who are part time employees. The on-Call employees have inconsistent and irregular hours per week, depending on customer demand each week. PAYROLL PRACTICES at Cheong Bakery: -

Fang hires new employees and the payroll department discovers this fact when a supervisor submits hours worked data to timekeeping and it is forwarded to the payroll department for processing.

- Blank payroll cheques are pre-numbered and the sequence is examined every pay period for any missing cheques. Pay cheques are signed by the same person who prepared the cheque, to reduce time spent by accounting staff on payroll processing, Blank payroll cheques are pre-numbered and the sequence is examined every pay period for any missing cheques. - Pay cheques are signed by the same person who prepared the cheque, to reduce time spent by accounting staff on payroll processing.

- The department that records time worked by production employees ("timekeeping" is separate from the payroll department

- Time cards submitted by production employees as documentation of hours worked are sent directly to the "timekeeping" function to avoid wasting supervisor's valuable time signing pieces of paper.

- The payroll register is signed by the person preparing it as evidence of approval

- Payroll data is promptly stored in filing cabinets, so that staff does not have to ever waste time comparing the payroll data with personnel files of employees.

- Pay cheques are distributed in person and only given to the employee personally and individually.