Deepdiggers Ltd$,$ a mining company, has a large workforce of around $5000$ workers, many of whom are

migrant workers from rural regions and neighbouring countries. The company has a formal risk

assessment process that includes a risk committee. The risk committee meets twice a year to identify

and assess risks faced by the company and consider whether the risks are being appropriately

responded to$.$ The risks relating to human resources are always an item for discussion on the agenda.

Deepdiggers Ltd$\text{'}$s payroll cycle begins with the Human Resources $($HR$)$ department confirming the list of

current employees. This process involves checking active employment contracts against recent

terminations or hires, ensuring that only current employees are processed for payment, serving as a

critical control to prevent payroll errors.

Employees at Deepdiggers Ltd log their working hours, overtime, and any leave taken through a digital

timekeeping system. Supervisors must approve all logged hours to verify their accuracy before these

hours are submitted to the payroll department.

Once the approved timekeeping information is collected, payroll staff enter the data into the payroll

system. This step involves transferring hours, overtime, bonuses, and deductions accurately into the

system. A different team member then reviews the entries against the timekeeping records for accuracy.

The system automatically calculates the gross pay, deductions such as taxes, pension contributions, and

union dues, and finally the net pay. Any anomalies or exceptions flagged by the system are reviewed by

a payroll specialist, ensuring calculations are correct and compliant with the latest tax laws and company

policies.

Before any payments are made, the payroll register undergoes a final review and authorization by a

designated payroll manager or controller who ensures that the payroll is compliant with company policies

and legal requirements before disbursal.

Payments are executed via direct bank transfers from the company's payroll account. The payroll

account is a bank account that is separate from the business bank account and solely used for the

purposes of paying salaries. Each payment requires dual authorization from the finance department.

After payments are executed, the payroll team reconciles payroll totals with bank statements to verify that

the correct amounts have been disbursed.

Extract from the payroll cycle description for Deepdiggers Ltd

You are required to:

$3\mathrm{.}1$ Based on the extract from the payroll cycle description for Deepdiggers Ltd:

$3\mathrm{.}1\mathrm{.}1$ Identify the key controls present in the payroll cycle. $(7$ Marks$)$

$3\mathrm{.}1\mathrm{.}2$ Explain, for each key control identified, what risk this control lowers to an acceptable level. $(7$ Marks$)$

$3\mathrm{.}1\mathrm{.}3$ Formulate the tests of control you will perform when testing the identified key controls. $(7$ Marks$)$

Present your answer using the following structure:

Key

Controls

Identified

Risk lowered to acceptable level Tests of Control

List the key

control

identified.

Explain what risk the control lowers to an acceptable

level, e$.$g what would go wrong if the control was not

present.

List the test of control you will

perform to test the identified

control.

$3\mathrm{.}2$ Describe the risks that a company such as Deepdiggers Ltd might face relating to its workforce.