Control De)iciency Control Recommendation Test of control
Gross and net pay are The payroll supervisor Review a sample of the automatically calculated by should periodcally gross and net pay payroll package. These recalculate the net pay calculations generated by calculations are not based on the gross pay the payroll system for checked at all. and expected deductions. evidence that they have The review should be been approved and signed This means that any errors evidenced by a signature. off. made, would not be discovered. This may lead to overpayments or underpayments and incorrect payroll costs.
Wages are increased by the Changes to the standing Review the log of changes rate of in)lation each year data to re)lect the annual made to the standing data and the clerks are wage increase should be for evidence that they responsible for updating made by a senior member were made by senior the standing data in the of the payroll department. member of the payroll payroll system. department.
The apparent lack of
authorization to changes in standing data increases the risk of errors, leading to the over or understatement of wages, and the incorrect payment of wages. Authoristion is only All overtime hours worked Review a sample of the required by department whether in lieu of pay or weekly overtime sheets for heads of any overtime in holidays, must be evidence of signature by excess of 30% of standard authorized, by the relevant the head of the hours. department head. The department concerned. authorisation should be This is increase the risk of evidenced by signatures. employees claiming for overtime not worked, lead to additional payroll costs. If employees choose Payroll clerks must agree Review a sample of instead to take days off, holidays taken and the holidays taken and the payroll clerks should overtime report, and overtime to verify whether check back to the record that this has been the payroll clerk has 'Overtime worked' report; done. agreed the time taken in however, this report is not holiday and overtime always checked. report. This increases the risk of employees taking unauthorized leave, leading, again to wages being paid for days which have not been worked. The )inance director The )inance director Obtain a sample of reviews the total list of should agree a sample of payment list and review bank transfers and the employees on the staff for signature by the compares this to the total records to the payment )inance director as amount to be paid per the list, and vice versa, to evidence that the control is payroll records. ensure that payments are operating correctly. complete, and made only This will increase a risk of to bona )ide employees. )ictitious employees, or These checks should be employees who have left evidenced by the )inance the company, appearing on director’s signature. payroll. As a result, fraudulent payments could be made.
