PAYROLL INTERNAL CONTROL WEAKNESSES 8 marks REQUIRED: With respect to the payroll process at Cheong Bakery, identify 4 (four) weaknesses in Internal Control and explain WHY the practice is a weakness. SITUATION: CHEONG BAKERY Fang Cheong is the owner of Cheong Bakery. The company has 20 full time employees who work in production and administrative functions (including Accounting and Human Resources). In addition to the full time staff, Cheong Bakery uses a group of 30 "On-Call" workers who are part time employees. The On-Call employees have inconsistent and irregular hours per week, depending on customer demand each week. PAYROLL PRACTICES at Cheong Bakery: - Information about all newly hired employees is communicated in writing to the payroll department. - Blank payroll cheques are not pre-numbered because Cheong's bank charges extra to produce such cheques and Fang thinks the best business decision is to avoid paying the extra fee. - Pay cheques are signed by the same person who prepared the cheque, to reduce time spent by accounting staff on Davroll processing. PAYROLL PRACTICES at Cheong Bakery: - Information about all newly hired employees is communicated in writing to the payroll department - Blank payroll cheques are not pre-numbered because Cheong's bank charges extra to produce such cheques and Fang thinks the best business decision is to avoid paying the extra fee. - Pay cheques are signed by the same person who prepared the cheque, to reduce time spent by accounting staff on payroll processing. - The department that records time worked by production employees ("timekeeping") is separate from the payroll department. - Time cards submitted by production employees as documentation of hours worked are approved by the supervisor. - The payroll register is not signed by the person preparing it, in order to keep "clean copies" of documents for the auditors to examine. - Payroll data is promptly stored in filing cabinets, so that staff does not have to ever waste time comparing the payroll data with personnel files of employees. - Pay cheques are distributed in person and only given to the employee personally and individually