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 above company may have the following uncontrolled risks associated with the payroll system.

1. Security

Here the company clerk uses department system to record the employees,s data. Prior to this all the details are manually recorded. In both these stages the company didnt taken any sufficient security procedures to secure the data. payroll system houses all sorts of sensitive information on both your business, and employees’ financial details.So it’s important to know what security procedures are in place for the organisation.

For example, imagine the payroll officer responds to a phishing email purportedly from the CEO of the organisation asking for the key details of another employee.

It sounds far-fetched, but it’s actually happened. To Snapchat.

So having both a good technology solution and good payroll practices in place is vital.

2. Non-compliance

A lot around businesses underpaying employees of late, and rightly so it’s an issue which is getting a lot of attention. Here in this case the clerk if he forgot to updates its software there will be chances to occure under paying. Not only that its doubt that they are working and mainitaining the payroll system as per labour laws.

So, better to have a solution which automatically updates with all the latest compliance changes.

3. Data loss

It’s always important to have a backup in place, and this is doubly important for payroll. Here they are manually preparing data first if its lost in the first stage of preparation itsself its gone. Similerly there is nothing mentioned about what type of backuo measures are they are using for datas in the department system.

4. Key personnel risk

Payroll makes the business world goes around – there’s no argument there. If people don’t get paid, then they’re not turning up for work.

Organisations also need to think about documentation, so that if there is a gap at least there’s some kind of guide to keep payroll running smoothly.

5. Fraudulent activity

It’s an uncomfortable truth, but a lot of fraud is committed through the HR department. Under this company's situation no proper monitoring are done so in the ground level itsself there are chances to conduct Fraudulent activities.

so the above five are the possible uncontrolled risks associated with the company’s payroll system.

Hope this answer will help you!