Question 2 [50] You are the auditor of Mlilo Ltd, an electric appliance manufacturer. The company employs 400 workers and 20 foremen working within 4 departments. Each department has a factory administration clerk who is responsible for its wages. The wage week runs from Friday to Thursday. Waged employees are paid every Friday based on the hours worked. The junior audit clerk has prepared the following draft working papers as discussion document for you. Working Paper 1- Payroll Controls 1 I have noted that controls over human resources are in place. These controls have been assessed as being sound. 2 Each department keeps time records by having any one of the foremen in that department sitting at the four entrances to the factory (one for each department) and ticking off employees on the attendance register as they enter. Employees must present identification cards which contains the employee's number, name and photo when entering. The foremen look at the identification card and place a tick in the column for entry for that particular day. At the end of the day the same process is followed, and a tick is made in the exit column for that day. Each employee is credited with 8 hours a day for two ticks, one in the entry and one in the exit column. If employees arrive late or have to leave early, they must report to the foremen who record the time of arrival or exit. Any overtime worked is added to an employee's hours by the foreman in a separate column on the attendance register. 3 The factory administration clerks collect the attendance registers for their department early on Friday mornings, calculate the hours worked for each employee and hand them to the wage clerks for processing. 4 The payment preparation and payout is done as follows: After each wage clerk has entered the hours worked into the computer, the computer calculates each worker's gross pay, deductions and net pay by using the wage rates and deduction in accordance with the personnel information kept on the database. The weekly wage report is then printed by the computer. This report is kept in the wage department One of the wage clerks verbally informs the financial director of the amount needed for the week's net wages. The financial director then prepares a cash cheque for the exact amount of the week's net wages, after which the cheque is cashed wage clerk. The computer prints pay envelopes for the workers to be paid, bearing the workers names and employee numbers. Each wage clerk fills the pay envelopes for the department for which he/she is responsible. If a discrepancy occurs, the pay envelopes are checked and corrected by the wage clerks. The pay envelopes are then sealed. On Friday afternoons the pay envelopes are handed to the relevant foremen for the weekly payout. Each foreman pays out the wages to the workers working for him. Unclaimed wages are given back by the various foremen to a wage clerk. You are required to: a) Identify the weaknesses and recommend improvements in the wage system described in Working Paper 1. (36)