Chapter 8 EMPLOYEE COSTS

Question 1

what are the 3 stages of employee cost system?

Answer 1

• calculate wages and salaries
• record wages and salaries
• pay wages and salaries

another key element is calculation of payroll taxes to HMRC

Question 2

what is the standing data for employee costs?

Answer 2

• information in the employee costs system that doesnt vary regularly e.g. hourly rates, salary, overtime rates

Question 3

what is the variable data for employee costs?

Answer 3

hours worked or overtime

Question 4

What are the key risks when calculating wages and salaries?

Answer 4

• employees paid incorrectly
• employees paid after they have left

Question 5

what are the key control objectives when calculating wages and salaries?

Answer 5

• employees only paid for work done
• gross and net pay correctly calculated

Question 6

what are the key control activities when calculating wages and salaries?

Answer 6

• regular checking of wages and salaries
• one to one checks and authorisation of changes to standing data
• record hours worked with timesheets etc
• compare payroll to budget

Question 7

What are the key risks when recording wages and salaries?

Answer 7

• gross and net pay incorrectly recoded
• incorrect dedications so penalties from HMRC

Question 8

what are the key control objectives when recording wages and salaries?

Answer 8

• record gross and net pay and all deductions accurately
• pay correct amounts to HMRC and on time

Question 9

what are the key control activities when recording wages and salaries?

Answer 9

• payroll reviewed by manager
• reconcile total pay and deductions to previous months totals
• compare payroll total redecorated to budget
• agree gross earnings and total tax deductions to tax returns

Question 10

What are the key risks when paying wages and salaries?

Answer 10

• payments may be made to bogus employees
• payments to employees maybe incorrect

Question 11

what are the key control objectives when paying wages and salaries?

Answer 11

• pay correct amounts to actual employees

Question 12

what are the key control activities when paying wages and salaries?

Answer 12

• segregation of duties between maintenance and preparation of payroll staff
• physical controls over cash payments
• for bank transfers comparison of payments to payroll and authorisation by manager
• maintenance and reconciliation of wages and salaries nominal ledger amount