Question

The following is the description of the payroll system of a manufacturing company: Employees of the company use a time clock in an unsupervised area to record their time on the job. The site supervisor tries to monitor the recording process. However, due to other duties, the supervisor is often distracted. The site supervisor collects the time cards from employees every Friday. The supervisor then reviews and approves the time cards and send them to payroll clerk. The payroll clerk uses a stand-alone workstation to record the employees’ earnings in the employee records and print two hard copies of payroll register. One copy of the payroll register is sent to the accounting department and the other copy is filed with the time cards in the payroll department. The accounting clerk receives the payroll register, reviews it for accuracy, and use the department computer to record the transaction by posting to salary expenses, cash and various withholding accounts at general ledger and subsidiary ledgers. The clerks then prints the hard copy of pay cheques, which are written on the general cash account. The accounting clerk signs the pay cheques and sends them to the site supervisor who distribute them to the employees. The clerk then files the payroll register in the accounting department.

Discuss the uncontrolled risks associated with the company’s payroll system.

Answer 1

The Uncontrolled risks are those types of risks which cannot be controlled by the organisation if the prevailing routines or standard continue.The Uncontroed risks can result in severe consequences which are unwanted by organisation.

The following are the uncontrolled risks associated with the companys payroll system:

• Supervision: As the clock machine is located in an Unsupervised area, there is a risk that an employee clocks in for another employee who is absent or late.
• Manual Timecards : If an employee manually prepares their own timecard ,it might be easy to falsify the number of hours that were worked.The employees writes down the wrong times on the card to overstate their hours
• Segregation of duties : Supervisoe is reviewing and approving the time cards. There is a possibiity that supervisor may approve timecards of non existent employees.There should be segregation of duties i.e,Timecards of employees sould be approved by supervisor and verified by a timekeper.
• Mispalcement of documents - there is a possibiity of misplacement of documents if there is a manual system of payroll register.Instead we can make it Computerised and online.
• Authorisation - The payments should always have a double authorisation to mitigate any risks.Here the accounting clerk herself printing and signing the cheques.
• The entire process can be made online i.e, Online payments to workers are more prefered to reduce the risks.