You are employed in the internal audit department of ADF Mining Limited as the internal audit supervisor. Your chief audit executive (CAE) informed you that you are scheduled to start a payroll audit in two weeks. He provided you with a description of the employee payroll process that was captured by the external auditors when they performed their audit previously.The process description is as follows
 

Payroll division of ADF Mining Limited Ltd consists of three employees:

Two payroll clerks (Dina van der Schyff and Piet Koekemoer)

The payroll manager (Thando Modisa)

For timekeeping of the employees, ADF Mining Limited uses a computerised clocking system.

The company uses a biometric reader for identification of employees and recording hours worked. This biometric system is controlled by the human resources section. The employee is required to place his or her thumb on the scanner at the entry/exit point to the workplace. The

capturing of time of entry and exit will only be recorded if there is a match of the thumb print to the employee's thumb print stored on the computer. When the payroll is processed, the file of hours worked is imported and the wage application software automatically calculates the hours

worked by the employee for the wage period.

At the end of the wage period, the payroll is prepared. The hours that have been worked, both normal and overtime for each employee, will be on the system against the employee's hourly wage rate to arrive at the gross amount to be paid. Before the payroll preparation commences, a schedule of normal and overtime hours for the weeks is printed out and sent to the supervisor for approval. The supervisor checks the schedule for any incorrect or unusual hours recorded and that overtime hours recorded were authorised prior to being worked. Once satisfied, he approves the hours worked schedule on the system. Access to the hours worked file is restricted and the supervisor has no write access to the file.

The payroll is prepared automatically by the computer system from the following:

1. Employee details updated by the human resources section, including new appointments and resignations.

2.Access to the payroll system is restricted to authorised personnel through use of a valid username and password.

3.Details of deductions to be made from employees' gross wages are updated by the payroll clerk. Dina is responsible for the payroll of the employees with surnames A-L and Piet is responsible for employees with surnames N-Z.

The payroll clerk has no write access to the masterfile data (such as name, level, hourly rates, etc) applicable

to the employee.

4.Once the payroll is processed, the payroll and a number of supporting schedules will be produced for final review by Thando. As the manager, Thando has only read access to the system.

5.Once the payroll manager is satisfied with the payroll file, he will select the "approve" option and there will be no further write access to the file. The payroll will then be processed for payment to employees by EFT transfers.

6.The payroll system is set up to print out automatically an activity report of access gained to the payroll system, and an exception report of any unsuccessful attempts.

These reports are generated at the end of each week and are only accessible to the payroll manager. The payroll manager is responsible for reviewing and following up on issues indicated in the report.

 

Required:

Marks Formulate the tests of controls that you will perform to test the automated internal controls described in the scenario.