The Vane Corporation is a manufacturing concern that has been in business for the past 18 years. During this period, the company has grown from a very small family-owned operation to a medium-sized company with several departments. Despite this growth, many procedures employed by Vane have been in effect since the business was started.
Vane’s current payroll process is semi-automated. The payroll operation involves each worker picking up a weekly time card on Monday morning and writing in his or her name and identification number. These blank cards are kept near the factory entrance. Workers fill in their daily arrival and departure times each day on the card. Each Monday, the factory supervisor collects the time cards for the previous week and sends them to data processing.
In data processing, the time cards are entered into the computerized payroll system. The system updates the payroll records and prints out the paycheques. The cheques are written on the regular chequing account, imprinted by a signature plate with the treasurer’s signature, and sent to the factory supervisors who distribute them to the workers or hold them for absent workers to pick up later. Supervisors notify data processing of new employees, terminations, changes in hourly pay rates, or any other changes affecting payroll.
The workers also complete a job time ticket for each individual job they work on each day. These are collected daily and sent to cost accounting, where they are used to prepare a cost distribution analysis.
Further analysis of the payroll function reveals the following:
1. A worker’s gross wages never exceed $600 per week.
2. Raises never exceed 55 cents per hour for the factory workers.
3. No more than 20 hours of overtime are allowed each week.
4. The factory employs 150 workers in 10 departments.
The payroll function had not been operating smoothly for some time, but even more problems have surfaced since the payroll was computerized. The factory supervisors would like a weekly report indicating worker tardiness, absenteeism, and idle time so that they can determine the amount of productive time lost and the reasons for the lost time.
The following errors and inconsistencies have been encountered the past few pay periods:
1. A worker’s paycheque was not processed properly because he had transposed two digits in his identification number on his time card.
2. A worker was issued a cheque for $4531.80 when it should have been $453.18.
3. One worker’s paycheque was not written, and this error was not detected until the paycheques for that department were distributed by the supervisor.
4. Some of the payroll register records were accidentally erased from the system when a data processing clerk tried to reorganize and rename the files in the hard drive. Data processing attempted to re-establish the destroyed portion from original source documents and other records.
5. One worker received a much larger paycheque than he should have. A clerk had keyed 84 instead of 48 for hours worked.
6. Several paycheques issued were not included in the totals posted to the payroll journal entry to the general ledger accounts. This was not detected for several pay periods.
7. In processing non-routine changes, a data processing clerk included a pay rate increase for one of his friends in the factory. By chance, this was discovered by another employee.
Identify the control weaknesses in Vane’s payroll procedures and in the computer processing as it is now conducted. Recommend the necessary changes to correct the system. Arrange your answer in the following columnar format:
Control......... Weaknesses Recommendations
1........... 1.

  • CreatedJanuary 09, 2015
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