Following are 10 key internal controls in the payroll cycle for Gilman Stores Ltd:
1. To input hours worked, payroll accounting personnel input the employee's identification number. The system doesn't allow input of hours worked for invalid employee numbers.
2. The system automatically calculates pay at time-and-a-half once hours worked exceed 80 in a two-week pay period.
3. The system accumulates totals each pay period of employee payments and debits the payroll expense general ledger account for the total amount.
4. Each pay period, payroll accounting clerks count the number of time cards submitted by department heads for processing and compare that total with the number of payments processed by the system to ensure that each time card has a payment.
5. For factory personnel, the payroll system matches employee identification numbers with ID numbers listed on job costing tickets as direct labour per the cost accounting system. The purpose of the reconciliation is to verify that the amount paid to each employee matches the amount charged to production during the time period.
6. The system generates a listing by employee name of payments processed. Department heads review these listings to ensure that each employee actually worked during the pay period.
7. The payroll application is programmed so that only human resource personnel are able to add employee records to the employee master file.
8. On a test basis, payroll accounting personnel obtain a listing of pay rates and withholding information for a sample of employees from human resources to recalculate gross and net pay.
9. Input menus distinguish between executive payroll, administrative payroll and factory payroll.
10. The system automatically rejects processing an employee's pay if inputted hours exceed 160 hours for a two-week pay period.
REQUIRED
For each control:
a. Identify whether the control is an application control performed by the computer (AC) or a manual control performed by Gilman employees (MC).
b. Identify the related transaction-related audit objective that is affected by the control.