Eagle Star Ltd a Manufacture Company   started operations in October 2010 the company specializes in manufacture different types of paints.  The company operates a three shift system resulting from which production is carried out round the clock. 

 

 Wages system – shift workers 

 

On a daily basis the first shift starts at 6am when the workers arrive on the plant their time is recorded via a ‘clock in’ using an electronic identification card. The card is scanned by the time recording system and each production shift-worker’s identification number is read from their card by the scanner. 

The worker is then logged in as being at work. Shift-workers are paid from the time of logging in. The logging of the time is not supervised therefore someone can logged the time for their friends once the person has their Identification card. 

Shift-workers are split into groups of about 25 employees per shift, with each group under the supervision of a shift supervisor. Each day, each group of shift-workers is allocated different types of paint   to manufacture. At least 400 gallons of paints are manufactured by each work group. 

The production workers are allowed to work overtime without the prior approval of the shift supervisor the only control that is t in place, the shift supervisors are required to monitor the lunchbreaks to ensure the workers do not take more that their allotted 30 min break as if this is not done there is the risk of the overtime hours would automatically increase. On the completion of   each shift each employees is required to re-scanning their identification card to verify the end of their shift.

 

Payment of wages 

 

Details of hours worked each week are sent electronically to the payroll department, where hours worked are allocated by the computerized wages system to each employee’s wages records. Staff in the payroll department compare hours worked from the time recording system to the computerized wages system, and enter a code to confirm the accuracy of transfer. 

The code would also acts as authorization to calculate net wages. The code is the name of a domestic cat belonging to the department head and is therefore generally known around the department. 

Each week the computerized wages system calculates the following: 

(i) Gross wages, using the standard rate and overtime rates per hour for each employee,  

(ii) Statutory deductions from wages, and 

(iii) Net pay. 

 

 

Salaries system – shift managers 

All shift managers are paid an annual salary; there are no overtime payments. Salaries were increased in July by 2.5% and an annual bonus of 2.5% of salary was paid in November. 

 

Required: 

(a) Identify and explain three substantive analytical procedure that can be perform on the shift manager salary for each procedure identify. Resulting from each procedure, state your expectation.  

 (b) Inspection is an audit procedure that can be used by auditors to test the accuracy, explain FOUR additional procedures that can be used in collecting audit evidence and discuss whether the auditor will benefit from using each procedures. 

Answer rating: 100% (QA)

Answer Gross wages are the full amount an employee earns before taxes and other deductions are withheld from the paycheck The amount earned depends on ... View the full answer