You are the internal auditor at Dynamic Clothing Limited. The company manufactures clothing for the fashion industry. A production manager heads the production department and manages the activities of 20 supervisors and 500 workers. Wages are paid every Friday, based on the hours worked during the preceding calendar week.

New workers are appointed by the supervisors. On Monday mornings the supervisors hand out a blank clock card to each of the workers. Workers write their names and personnel numbers on the clock cards and use the card to record their hours worked for that week. The clock machine is situated at the entrance of the factory and workers clock in and out at the entrance of the factory by placing their cards into the clock machine.

On Monday mornings the supervisors hand the used clock cards over to a wages clerk. The clock cards are then sorted alphabetically and distributed amongst four wage clerks. Each wage clerk always receives employees' clock cards of the same part of the alphabet for which he/she is responsible to capture the hours worked.

The wage clerks then perform the following actions in respect of the clock cards:

1. Calculate the total amount of hours worked per clock card and write it down on the clock card.

2. Punch in the hours worked on the wages file on the electronic wages system per personnel

number.

After all the hours worked have been entered on the electronic wage system, the computer calculates each worker's gross wages, deductions and net wages by using the wage ratios and deductions according to the information contained in the personnel files on the database. The electronic wages system generates a weekly wage report, which is filed at the wage department.

One of the wage clerks verbally tells the accountant the amount of cash required for the week's wages.

The electronic wages system prepares wage envelopes for those workers who must be paid by printing the workers' name and personnel number on the envelope. Each wage clerk then fills the wage envelope of the workers allocated to them based on the portion of the alphabetic list they are responsible for. No money/cash should be left after all wage envelopes have been filled. If any differences do occur, the wage envelopes will be checked and corrected by the wage clerks.

The wage envelopes are then sealed. The wage envelopes are handed over to the supervisors on Friday afternoons for wage pay-outs. Each supervisor pays wages to the workers reporting to him/her. Unclaimed wages are returned to the wage clerks.

REQUIRED:

5.1. Identify 12 weaknesses in the wage system and, for every weakness, suggest an appropriate control activity to address the weakness.(24 Marks)

Use the table below to document your answers:

WeaknessRecommendation