An auditor's audit working papers include the following narrative description of a segment of the Croyden, Inc., factory payroll system and the flowchart presented on the following two pages.

Narrative Memorandum Internal control over the personnel department is effective and is not included in the accompanying flowchart.

At the beginning of each workweek, payroll clerk No. 1 reviews Payroll Department files to determine the employment status of factory employees, and prepares and distributes time cards as each individual arrives at work. The clerk verifies the identity of each payee before delivering signed checks to the factory supervisor. At the end of each workweek, the supervisor distributes payroll checks for the preceding workweek, reviews the current week's employee time cards, notes the regular and overtime hours worked on a summary form, and initials the time cards. The supervisor then delivers all time cards and unclaimed payroll checks to payroll clerk No. 2.

Required:

1. What are the deficiencies in internal control?
2. What inquiries should the auditor make to clarify whether additional deficiencies exist?

Transcribed Image Text:

Factory Employees Factory Foreman Personnel Clock Cards Clock Cards Time Clock Punched In and Out Daily Time Clock Punched In and Out Daily Clock Cards Submitted for Approval Weekly Clock Cards Copy Copy Payroll and Update Withhold- ing Forms Copy