The Generous Loan Company has 100 branch loan offices. Each office has a manager and four or five subordinates who are employed by the manager. Branch managers prepare the weekly payroll, including their own salaries, and pay employees from cash on hand. Employees sign the payroll sheet signifying receipt of their salary. Hours worked by hourly personnel are inserted in the payroll register sheet from time cards prepared by the employees and approved by the manager.

The weekly payroll register sheets are sent to the head office along with other accounting statements and reports. The head office compiles employee earnings records and prepares all federal and provincial salary reports from the weekly payroll sheets.

Salaries are established by head office job evaluation schedules. Salary adjustments, promotions, and transfers of full-time employees are approved by a head office salary committee based on the recommendations of branch managers and area supervisors. Branch managers advise the salary committee of new full-time employees and terminated employees. Part-time and temporary employees are hired without advising the salary committee.

Help:

a.making a payroll audit program to be used in the head office to audit the branch office payrolls of the Generous Loan Company.

b.Based on your review of the payroll system, how might funds for payroll be diverted fraudulently?