You are planning for the 30 June 2020 audit of Frankel Factors Ltd. A new payroll application system was implemented and went live on the 1st January 2020. You have been advised that  

• The new payroll application is more complex than the old system, but its reporting function provides more detail. For example, this now calculates leave, superannuation and payroll tax, as well as the corresponding accruals. The old system did not.   
• Due to the brief time available to implement the new system, the previous application ceased operation on 31st December 2019 and the new application went live on 1st January 2020 without running parallel with the previous application. Staff training and testing of the new application was limited.  
• Access to the master file is restricted to the payroll supervisor and her deputy. Access to the transaction files is restricted to payroll staff who are responsible for the processing of fortnightly and monthly pay.  

• Prior to the introduction of the new system, the payroll master and transaction files were kept in a separate database from the general ledger application. At the end of each month, the IT staff imported transaction data from the database into the general ledger. Management decided to upgrade the existing accounting system due to the frequent problems encountered by IT staff when importing data into the general ledger.  

Required

a) Based on the information above, explain two (2) relevant concerns you may have about the old payroll system.                                                                                     (2 Marks)

b) Based on the information above, explain two (2) relevant concerns you may have with the implementation of the new payroll system.                                          (2 Marks)

c) Explain one (1) internal control you would expect to see with the implementation of the new payroll system.                                  (1 Mark)  

d) Identify two (2) payroll related accounts that would be affected by the above and complete the table below for each account.                                                   (10 Marks)

Account affected	What could go wrong?	Relevant assertion	Test of control	Substantive Test

Answer rating: 100% (QA)

Ans a Concerns relating to old payroll system a payroll solutions might be Outdated like failure in ... View the full answer