You have just been hired as the payroll manager of a mid-sized manufacturing company. You notice that the time cards are paper documents that the employee submit at the end of the week into an open cardboard box outside of your office. The time cards contain the employee's name, pay rate, social security number, and division where he/she works. You ask the only employee currently in the payroll department, where the payroll files are and she points you to another large cardboard box inside your office. Finally, you ask about the tax forms (940, 941, and state unemployment) and she informs you they are also in that box but she really does not know that much about them or how to fill those forms out and just copies the same numbers from the forms she received when she started 2 years ago over and over again.

Based on what you have just learned, evaluate the risk associated with payroll at this company and the impact on the financial statements keeping in mind both auditing standards and managerial accounting concepts. Discuss how you would design an accounting information system to minimize the largest risk you have discovered.