CASE STUDY ANALYSIS

You are testing the controls over the payroll system at Barwood Supplies Limited. After completing some analytical procedures, you confirmed that the following controls have been operated throughout the year, 2021 January to December:

Sample check of payroll calculations by a payroll manager

Review of payroll listing once prepared before details are entered into the banking system

Segregation of duties between calculation of monthly payroll and responsibility for changes to standing data

Each department manager receives a list of employees in his/her department to confirm that they should be paid

A. What is the chief reason for the control of segregation of duties between calculation of monthly payroll and responsibility for changes to standing data? (3 marks)

B. Specify the main procedure that would provide the most reliable evidence that the test of controls relating to the sample check of payroll calculations by a payroll manager is working properly. (3 marks)

C. Explain whether or not inspection of employee contracts to confirm salaries to be paid is a test of control. (3 marks)

D. What is the rationale for review of the list of employees by department managers? (3 marks)

E. State TWO (2) objectives of controls in the payroll system regarding calculation of the payroll. (2 marks)

F. Outline TWO (2) substantive procedures that could be applied to testing for each of the following financial statement assertions:

i. Accuracy

ii. Completeness

iii. Occurrence