Requirement: Evaluate the controls which would strengthen payroll and sales system Advantage / Strengths Disadvantage/ Weaknesses

The Welsh Sofa Company Ltd (Welsh Sofas) was established 15 years ago. It has a year-end of 31 May 2023. Welsh Sofas is an upholstery furniture manufacturer: designing, developing, and producing a range of vintage, contemporary, leather and fabric sofas as well as upholstered accessories. It offers both off-the shelf furniture as well as a customisable range of products. Welsh Sofas sells its products to luxury furniture stores, hence orders received tend to be for a low number of high value items. Orders are received via e-mail at Welsh Sofas' offices. All customers require a credit check with an external agency when first opening their account with Welsh Sofas. If the sales order does not require customising, a booking clerk first checks the customer's limit on the receivable's ledger, then inventory levels using the Inventory Management System (IMS) software on Welsh Sofas' computer network. E-mails are filed electronically by customer name in the sales programme used by Welsh Sofas. If the customer's balance is below their credit limit and sufficient items are in stock, the customer's furniture order is manually entered onto the IMS and confirmed to the customer using email or telephone. If there are insufficient inventory levels, the booking clerk waits until levels rise again before entering the email order onto IMS. The IMS system sends the order details to the warehouse, who print out a Goods Despatch Note (GDN), which accompanies the delivery of the goods to the customer. On despatch of the goods to the customer, the warehouse operators use IMS to indicate that the order is complete and despatched. Customisable orders are dealt with slightly differently. The booking clerk manually enters the order straight onto IMS. The Production Scheduler programmes the bespoke order into the production run using details extracted daily from the IMS. Once the customised furniture is produced, the IMS system send the order details to the warehouse and the same procedure is followed as for standard orders. For both off-the-shelf and customised order, once IMS indicates that the order is complete and despatched, the details are transferred within the network to the trade receivable's lending programme, where a sales invoice is raised. Standard inventory amounts are allocated to each order, however customisable options are individually priced by the sales ledger clerk and manually entered into the sales system. Sales invoices and customer statements are sent via email. Welsh Sofas' workers normally work five shifts of 7.5 hours each week. Demand for Welsh Sofas' products are particularly high in October as its customers prepare for the Christmas surge and therefore, overtime is available for those employees who want to take advantage of it. Welsh Sofas employs around 120 factory workers who arrive to start their shift shortly before 6am. All factory workers and supervisors are paid on a weekly basis according to the number of hours they work. They register their arrival on the factory floor by holding an electronic identification card against a monitor. The card is scanned by the time recording system and each production shift-worker's identification number is read from their card by the scanner. The worker is then logged in as being at work. Shift-workers are paid from the time of logging in. The logging in and out process is not monitored as it is assumed that the workers will want to swipe their card to get paid. The factory workers are offered overtime to complete large customer orders especially around October and those employees wishing to accept the overtime hours sign their name on the supervisors' list at the start of the working day. This list is used as a form of overtime authorisation when it is submitted to the payroll clerk, Max, at the end of the week. Before finishing their shift, the supervisors check the monitor to see if any employees have forgotten to swipe out. The payroll clerk extracts the details of hours worked each week from the time recording system. He compares the list of names on the supervisors' overtime lists with the extracted data, which separates out the standard hours from the overtime hours. When satisfied that the extracted data matches the supervisors' overtime list, Max enters a code number which authorises the computerised payroll system to import the hours worked from the time recording system. The code number also acts as authorisation to calculate net wages. Max, his supervisor and the purchase ledger clerk all know the code number. Each week the computerised wages system calculates: (i) gross wages, using the standard rate and overtime rates per hour for each employee, (iii) net pay. A summary listing of net pay by employee according to date of birth is generated. Max maintains a list of employee bank details. A different code number is used by Max to authorise and make payment to employees, using Welsh Sofas' online banking systems. When the Financial Accountant has sufficient time, she reviews the total amount of wages paid and compares it to the monthly budgeted accounts. Any discrepancies are discussed with Max. If an employee decides to leave Welsh Sofas, the Human Resources department sends an email to the payroll department. The email outlines the employee's termination date as well as any unclaimed holiday pay. Max prints out a copy of the email and makes the adjustment to the payroll records. Welsh Sofas' external auditors are Thomas \& Thomas LLP. You are employed by Thomas \& Thomas LLP and your team has just finished its audit of Welsh Sofas. The engagement partner has requested you present the results of your work to date on the following areas