SOALAN/ QUESTION 2

Toyyib Biz employs 500 production, maintenance and janitorial workers in eight separate departments. In addition to supervising operations, the supervisors of departments are responsible, for recruiting, hiring and firing workers within their areas of responsibility. The organization attracts casual labour and experiences a 15 to 25 percent turnover rate in employees per year.

Toyyib Biz designs specialised procedures for payroll process, which is separated from general purchasing and disbursement procedures. The payroll procedures for Eximus Company, are as follows. Employees clock on and off the job each day to record their attendance on time cards. Each department has its own clock machine located in an unattended room away from the main production area.

Each week, the supervisors gather the time cards, review them for accuracy, sign and submit them to the payroll department for processing. In addition, the supervisors submit personnel action forms to reflect newly hired and terminated employees. From these documents, the payroll clerk prepares payroll checks and updates the employee records. The supervisor of the payroll department signs the paychecks and sends them to the department supervisors for distribution to the employees. A payroll register is sent to the AP for approval. Based on this approval, the cash disbursements clerk transfers funds into a payroll clearing account.

Dikehendaki / Required:

a. Discuss three reasons why Toyyib Biz needs to create specialised procedures for payroll process.

(9 markah/marks)

b. Discuss two risks for the payroll fraud in the Toyyib Biz payroll system. For each risk, suggests how control procedures could be implemented to reduce the risks.

(12 markah/marks)

c. Describe an internal control that would prevent an employee from removing a computer and then reporting it as scrapped.

(4 markah)

(Jumlah markah/Total marks = 25)