Chapter 8: Employee costs

Question 1

Name 1 risk related to the setting wages process in the payroll system

Answer 1

employees are paid for work not done (pay too much money, pay employees who have left)

Question 2

Describe the process of setting wages in the payroll system

Answer 2

1. HR department keeps all employees personal file (personal information, profession, timesheets, clocking in and out, benefit package, pay rises)
2. for daily basis, employees perform clock in and out arrangements/ perform jobs to reach KPI/ overtime hours -> at the end of the month, total days of work are drawn from clocking device -> send to payroll accountant to summarize and prepare master file (including employees deductions) -> sent to payroll manager to authorize payment

Question 3

What procedures to prevent payment for employees who have left?

Answer 3

obtain evidence in writing related to the joining and removing of staffs -> setting/ removing employees personal files -> adding/ removing on the standing data in payroll system (password protected, limited access, authorization of changes)

Question 4

Name 2 risks related to the recording wages and deductions process in the payroll system

Answer 4

1. incorrect recording of wages and cash paid (payroll, cash at bank account, nominal ledger)
2. incorrect deductions leading to future liabilities

Question 5

Describe the process of recording wages and deductions process in the payroll system

Answer 5

1. payroll clerk enters the number of hours worked by each employees based on clock cards -> computerized report including pay rates and deductions are produced
2. sent to payroll mgt to check and authorize -> sent to payroll accountant to prepare journals to post on nominal ledger -> sent to finance department to prepare bank transfer list

Question 6

Name 2 risks related to the payment process in the payroll system

Answer 6

1. employees are not paid
2. non-employees are paid

Question 7

Which process should be segregated in the payroll system?

Answer 7

1. prepare payroll
2. prepare bank transfer lists
3. record in the nominal ledger