my q2 auditing

You recently started with your articles at HP Auditors and have been tasked to assist with the audit of Display (Pty) Ltd ("Display"). Display is a clothing manufacturing company situated in Blackheath Industrial, Western Cape. The entity markets and sells their own products. More than 350 people are employed across the administrative, manufacturing, human resources, and accounting departments of Display. All departments operate from the same premises which are owned by Display. Due to the impact, Covid-19 had on Display, the Board of Directors decided to expand operations and add a new product line to the current manufacturing line. This clothing line will focus mainly on pregnant moms. During the audit, you identified the wage-related account as a possible high risk at an assertion level. You compiled the following planning working paper from the wage system description provided by Mrs. Smith, the Accountant who prepares the weekly wages payments. This system description forms part of your audit work in assessing Display's system of internal control as part of the planning phase. The following is a system description as per your planning working paper of Display's payroll and personnel cycle: The premises in Blackheath consist of three buildings, namely the manufacturing plant, warehouse, and administrative building. All employees enter the premises through one guarded gate. 1. Workers' clock system Wages are paid on Fridays for the week ending the previous Wednesday. There is a Manager in charge of the Manufacturing Plant, Warehouse, and Administrative Building. Each Manager is fully responsible for the functioning of their premises, as well as for the appointment and determination of the wage rate for each of the wage earners, which each Manager keeps on file in their office. No distinction is made 87 HAUD331-1-July-Dec2022-FA2-MS-V4-18032022 ANNEXURE I: FORMATIVE ASSESSMENT 2 between the wages of permanent and temporary wage earners in terms of wage rates or working hours. Each day when employees arrive for work, they sign an attendance register and swipe their clock cards at a clocking machine situated at the centre of each building. When employees submit their completed clock cards to the Managers on Wednesday, they are issued with blank clock cards for the next working week. Normal work shifts are eight hours each, and no overtime is worked at Display. The Managers sign the completed clock cards on Thursday mornings and hand them, over to one of two Wage Clerks. The two Wage Clerks are Miss Slabbert, assigned to the manufacturing plant, and Mr. Ceasar, assigned to the warehouse and administrative building. They each prepare separate wages payrolls for the 2. Payroll calculations The number of hours worked per week for each employee is obtained from their clock cards. Adjustments to wage rates are made once a year, as soon as the fixed annual wage increase percentage is agreed upon with the labour unions. Deductions are made using the relevant deduction tables. After the wage payrolls for the week are prepared by Miss Slabbert and Mr. Ceasar, it is provided to Mrs. Smith, the Accountant who does a cash withdrawal for the weekly wages. The cash is given to Mr. Ceasar and Miss. Slabbert who then prepares the individual cash in an envelope. 3. Wage pay-outs Once the individual wage envelopes are prepared, each Manager is responsible for distributing wage envelopes to employees. 88 HAUD331-1-July-Dec2022-FA2-MS-V4-18032022 ANNEXURE I: FORMATIVE ASSESSMENT 2 Employees sign the relevant previous week's clock cards as proof of receipt of their wages. Apart from the functions described above, no other internal controls are performed in Display's wages system over: - appointment; - timekeeping; - preparation of wages payrolls and wage envelopes; - pay-out of wages; or - unclaimed wages. REQUIRED: 2.1. Identify and describe the weaknesses in the wage system of Display (Pty) Ltd. Ensure to thoroughly describe in your answer why the identified matter is a weakness. Structure your answer under the following sub-headings: - Appointments - Timekeeping - Preparation of wage payrolls and wage envelopes - Pay-out of wages (25 marks) 2.2. Describe the internal control measures that is not currently present, but should be present in the wage system to ensure proper internal controls regarding unclaimed wages. (10 marks)