Employee costs

Question 1

What are the stages of the employee costs system? (3)

Answer 1

1. Calculate wages and salaries
2. Record wages and salaries
3. Pay wages and salaries

Question 2

What are the key risks when wages and salaries are calculated? (2)

Answer 2

1. Employees may be paid incorrectly resulting in loss of staff goodwill
2. Employees may continue to be paid after they have left resulting in loss to the business

Question 3

What are the key control objectives when wages and salaries are calculated? (2)

Answer 3

1. Employees are only paid for work done

2. Gross and net pay have been correctly calculated

Question 4

What are some examples of controls activities when wages and salaries are calculated? (4)

Answer 4

CROR

1. Compare payroll to budget
2. Regular checking of wages and salaries to personnel records
3. One to one checks and authorisation of changes to standing data
4. Record hours worked where appropriate by use of timesheets or clocking in/out with controls over authorisation of hours/overtime and range checks on hours worked

Question 5

What are the key risks when wages and salaries are recorded? (2)

Answer 5

1. Gross and net pay may be incorrectly recorded resulting in misstatements in the financial statements
2. Deductions may be incorrect resulting in HMRC penalties or liabilities in respect of pension deductions

Question 6

What are the key control objectives when wages and salaries are recorded? (2)

Answer 6

1. Record gross and net pay and all deductions accurately

2. Pay the correct amounts to HMRC on a timely basis

Question 7

What are some examples of controls activities when wages and salaries are recorded? (4)

Answer 7

CRAP

1. Compare payroll totals recorded to budget
2. Reconcile total pay and deductions to previous month totals
3. Agree gross earnings and total tax deducted to tax returns
4. Payroll is reviewed and authorised by appropriate manager

Question 8

What are the key risks when wages and salaries are paid? (2)

Answer 8

1. Payments may be made to bogus employees

2. Payments to employees may be incorrect

Question 9

What are the key control objectives when wages and salaries are paid?

Answer 9

Pay the correct amount to actual employees

Question 10

What are some examples of controls activities when wages and salaries are recorded? (4)

Answer 10

CBRS

1. For cash payments, physical controls over the safe custody of cash and payslips
2. For bank transfers, comparison of payments to payroll and authorisation by appropriate manager
3. Reconciliation of wages and salaries control account
4. Segregation of duties between maintenance of personnel records, preparation of payroll, and payment of staff