Question

60 Glazer Company is a small manufacturing firm with 60 employees in seven departments. When the need arises for new workers in the plant, the departmental manager interviews applicants and hires on the basis of those interviews. The manager has each new employee complete a withholding form. The manager then writes the rate of pay on the W‐4 and forwards it to payroll. When workers arrive for their shift, they pull their time cards from a holder near the door and keep the time card with them during the day to complete the start and end times of their work day. On Friday, the time cards are removed from the holder and taken to payroll by any employee who is not busy that morning. If there were any pay rate changes for the payroll period due to raises or promotions, the manager calls the payroll department to inform payroll of these rate changes. Using the rate changes and the time cards, the payroll department prepares the checks from the regular bank account of the Glazer Company. The manager of the payroll department signs the checks, and the checks are then forwarded to each department manager for distribution to employees. Required: Describe any improvements you would suggest to strengthen the payroll internal controls at Glazer.

Answer 1

Following Points Should be Considered & Implement to Strengthen payroll Internal Control at Glazer

 All payroll transactions are preapproved.

 All valid payroll transactions are included in the accounting records in the proper period.

 All valid transactions are accurate, consistent with the originating transaction data, and

information is recorded in a timely manner.

 All recorded payroll transactions fairly represent the economic events that actually

occurred, are lawful in nature, and have been executed in accordance with management’s

general authorization.

 Access to payroll records are controlled and properly restricted to authorized personnel.

 Duties are assigned to individuals in a manner that ensures that no one individual can

control both the recording function and the procedures relative to processing a

transaction.

Risk assessment is the identification and analysis of relevant risks to achievement of the

objectives, forming a basis for determining how the risks should be managed. The risks

associated with each of the payroll objectives should be evaluated.

following are typical items that are communicated in payroll:

 Enrollment periods for benefits. Information should include plan options and dates for

enrollment.

 Pay periods and dates. Information should include dates of pay period, due date for time

sheets, and pay date.

 Holidays. Scheduled paid holidays should be communicated.

 Furlough days. the dates should be communicated to the employees.

 Personnel policies and procedures. Employees should have access to detailed policies

and procedures related to employment with the Company

 Salary information. Employees should receive annual notification of changes in pay rate

or salary.

 Benefits payment. Benefit providers must receive information regarding employee

enrollments.

 Tax withholding. Tax withholding payments and required reports must be sent.

Monitoring in payroll takes the form of supervisory activities. Reconciliations should be

reviewed by an appropriate level supervisor. The supervisor should initial and date the face

of the reconciliation as evidence of the review.

The payroll supervisor or another member of management should review all changes to

employee information. This can be easily accomplished by regularly producing an employee

addition/change report.