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    Croyden Payroll Case

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    Anonymous L7XrxpeI1z
    The weaknesses in the payroll system include: 1) Lack of approval of timecards by a supervisor. 2) Timecards are not compared to the payroll register. 3) Calculations in the payroll register are not verified. 4) Payroll checks are not reconciled to the register. 5) The payroll clerk has custody of unsigned checks and a signature stamp machine.

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    Croyden Payroll Case

    Uploaded by

    Anonymous L7XrxpeI1z
    356 views2 pages
    The weaknesses in the payroll system include: 1) Lack of approval of timecards by a supervisor. 2) Timecards are not compared to the payroll register. 3) Calculations in the payroll register are not verified. 4) Payroll checks are not reconciled to the register. 5) The payroll clerk has custody of unsigned checks and a signature stamp machine.

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    The weaknesses in the payroll system include: 1) Lack of approval of timecards by a supervisor. 2) Timecards are not compared to the payroll register. 3) Calculations in the payroll register are not verified. 4) Payroll checks are not reconciled to the register. 5) The payroll clerk has custody of unsigned checks and a signature stamp machine.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    356 views2 pages

    Croyden Payroll Case

    Uploaded by

    Anonymous L7XrxpeI1z
    The weaknesses in the payroll system include: 1) Lack of approval of timecards by a supervisor. 2) Timecards are not compared to the payroll register. 3) Calculations in the payroll register are not verified. 4) Payroll checks are not reconciled to the register. 5) The payroll clerk has custody of unsigned checks and a signature stamp machine.

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    Flowcharting Problem: Payroll Process

    A CPA's audit working papers contain a narrative description of a segment of the Croyden
    Factory, Inc., payroll system and an accompanying flowchart as follows:
    NARRATIVE
    The internal control system with respect to the personnel department is well-functioning and is
    not included in the accompanying flowchart.
    At the beginning of each work week, payroll clerk no. 1 reviews the payroll department files to
    determine the employment status of factory employees and then prepares time cards and
    distributes them as each individual arrives at work. This payroll clerk, who is also responsible for
    custody of the signature stamp machine, verifies the identity of each payee before delivering
    signed checks to the foreman.
    At the end of each work week, the foreman distributes payroll checks for the preceding work
    week. Concurrent with this activity, the foreman reviews the current week's employee time
    cards, notes the regular and overtime hours worked on a summary form, and initials the
    aforementioned time cards. The foreman then delivers all time cards and unclaimed payroll
    checks to payroll clerk no. 2.

    REQUIRED
    (A) Based on the narrative and Fig. 7.16, what are the weaknesses in the system of internal
    accounting control?
    Note: Do not discuss the internal control system of the personnel department.
    (CPA)

    Answer to Case:

    CPA Examination, Unofficial Answer

    Weaknesses in the system of internal control are the following:


    1. Lack of approval of the foreman's timecard by an appropriate supervisor is an unsound
    practice. Employees should not be permitted to maintain their own time records and submit them
    without approval.
    2. The computation of overtime and regular hours prepared by payroll clerk no. 2 that is used in
    the preparation of the payroll register is not compared with the summary of the regular and
    overtime hours prepared by the foreman.
    3. Arithmetic computations and rates of pay used in the preparation of the payroll register are not
    checked by a person who is independent of their preparation and payroll register columns are not
    verified (re-added) by a person other than the preparer of the payroll register.
    4. Payroll checks are not reconciled to the payroll register in order to prevent improper
    disbursements.
    5. A signature stamp machine should not be in the custody of any payroll clerk who has access to
    unsigned checks.
    6. Since the paymaster should be independent of the payroll process, signed payroll checks
    should not be distributed by the foreman.
    7. Unclaimed payroll checks should be in the custody of an employee who is independent of the
    payroll process.
    8. The comparison of regular and overtime hours indicated on payroll checks with regular and
    overtime hours indicated on time cards should not be performed by the clerk who is responsible
    for the original computation of regular and overtime hours indicated on the time cards.
    9. The comparison of gross and net payroll indicated on payroll checks with gross and net payroll
    indicated in the payroll register should not be performed by the clerk who is responsible for
    preparing the payroll register.
    One should also inquire whether:
    1. Payroll clerk no. 2 checks time cards for the foreman's written approval.
    2. Approved overtime is indicated on time cards.
    3. Employment, wage, and related data in payroll files are periodically crosschecked with
    personnel files for agreement.
    4. The punching of time cards is observed by a time keeper.
    5. Other mitigating internal control measures (for example, bonding, required vacations,
    etc.) are in existence.

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