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: 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 over time 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.

a. Based on the narrative and Figure, what are the weaknesses in the system of internal control?
b. Based on the narrative and Figure, what inquiries should be made with respect to clarifying the existence of possible additional weaknesses in the system of internal control?


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