Shattered $($Pty$)$ Ltd $($Shattered$)$ manufactures solar panels and supplies them to various customers across South Africa. The increase in load$-$shedding increased the demand for solar panels, and Shattered had to increase the number of hourly paid employees to ensure the demand for solar panels was met. The payroll was previously done manually, and Shattered has recently moved the payroll to a computerised system. Shattered is new to the computerised environment, and because payroll is highly confidential, the management of Shattered requires advice about the controls to ensure that the payroll Masterfile is secured. Shattered provided a few payroll procedures and they requested you to identify which procedures below would be classified as a general control or an application control as follows:

$1.$ Background checks are performed before employees are hired at Shattered.

$2.$ The Financial Manager approves all regular working hours and overtime.

$3.$ The Financial Manager and Financial Director approve amendments to the payroll Masterfile.

$4.$ When employees are terminated or dismissed, their user IDs and passwords are immediately deleted from the payroll system.

$5.$ The computer generates a payroll reconciliation of the current month to the prior month$$s wage period for the number of employees, net wages and deductions.

$6.$ A backup is implemented and tested for the payroll Masterfile.

$7.$ The computer produces an exception reporter for the payroll Masterfile.

$8.$ All staff involved in the new computerised payroll system must be sent for training.

$9.$ The clocking in and out of employees are monitored and supervised.

$10.$ All payroll department employees have unique IDs and passwords to access the payroll system.

Due to the new computerised environment implemented in the payroll system and the high volume of employees, the auditors decided to use computer$-$assisted audit techniques $($CAATs$)$ to audit the payroll system.

The payroll Masterfile has the following information for each employee:

$$ Name and surname.

$$ Identity number.

$$ The wage rate per hour.

$$ The number of hours worked.

$$ The applicable tax bracket per the South African Revenue Service $($SARS$)$ to ensure the correct Pay As You Earn $($PAYE$)$ is deducted. PAYE is the tax deducted by employees to be paid over to SARS.

$$ The Unemployed Insurance Fund $($UIF$),$ which is paid over to SARS.

$$ The Skills Development Levy $($SDL$),$ which is paid over to SARS.

$$ Whether the employees are active or terminated.

REQUIRED:

$1\mathrm{.}1$ With reference to the payroll Masterfile information for each employee, provide the audit procedures you will perform over the payroll of Shattered by using CAATs. $(28$ marks$)$

$1\mathrm{.}2$ With reference to the notes on payroll procedures from points $1$ to $10,$ identify which procedures would be classified as a general control or application control. $(10$ marks$)$

$1\mathrm{.}3$ Discuss the controls that should be implemented to prevent unauthorised changes to the payroll Masterfile$$s pay rate. $(13$ marks$)$