Rowe Manufacturing Company has about 50 production employees and uses the following payroll procedures.
The factory supervisor interviews applicants and on the basis of the interview either hires or rejects the applicants. After being employed, the applicant prepares a W-4 form (Employee’s Withholding Exemption Certificate) and gives it to the supervisor. The supervisor writes the hourly rate of pay for the new employee in the corner of the W-4 form and then gives the form to a payroll clerk as notice that the applicant has been employed. The supervisor verbally advises the payroll department of pay-rate adjustments.
A supply of blank time cards is kept in a box near the entrance to the factory. Each employee takes a time card on Monday morning, signs it, and notes in pencil on the time card the daily arrival and departure times. At the end of the week, the employees drop the time cards in a box near the door to the factory.
The completed time cards are taken from the box on Monday morning by a payroll clerk. Two payroll clerks divide the cards alphabetically between them, one taking the A–L section of the payroll and the other taking the M–Z section. Each clerk is fully responsible for one section of the payroll. The payroll clerks compute the gross pay, deductions, and net pay; post the details to the employees’ earnings records; and prepare and number the payroll checks. Employees are automatically removed from the payroll when they fail to turn in time cards.
The payroll checks are manually signed by the chief accountant and given to the supervisor, who distributes the checks to the employees in the factory and arranges for the delivery of the checks to the employees who are absent. The payroll bank account is reconciled by the chief accountant, who also prepares the various quarterly and annual payroll tax reports.
List your suggestions for improving Rowe Manufacturing Company’s internal control over factory hiring practices and payroll.