PG NO: 109
Q NO 219: SWIFT
Direct Controls
HR & Payroll department are
segregated:
The Co has HR department which is
responsible for setting up all new joiners
and a payroll department which
processes wages and salaries.
This will reduce chances of having
fictitious employees, because of
segregation of duties. There may also be
less misstatements and almost no
fraudulent entries, if no collision between
both depts.
Unique Employee Number:
A unique employee number is allotted to
each new employee which must be
entered in payroll system in order to do
processing of payment. This may again
help in reducing the chances of fictitious
employees and shuffling of data can also
be reduced.
Exception Report:
Test of Controls
Review the job description of payroll and
HR to confirm the split of responsibilities
with regards to setting up new joiners.
Discuss with members of the payroll
department the process for setting up
new joiners and agree new joiners to
documentation initiated by HR.
Using test data facility of CAATs, enter
the “Dummy Employee Record” without
unique number to ensure the rejection by
the system.
Using test data of CAATs, access the
system and review the sample of monthly
exception report and review the evidence
Monthly exception report is generated
and reviewed by the payroll manager
related to changes made in the payroll
standing data (permanent report ---confidential information). This would
ensure whether changes made were
authorised and any unauthorised
changes can be identified and can be
investigated to correct.
Reperformance of Gross/Net Pay:
There is automatic calculation of Gross to
Net pay, but the Supervisor recalculates
the payslips on sample basis, signs it and
investigate any discrepancies.
This would ensure the accuracy of
calculation and any error in system is
identified and corrected and reduces the
chances of incorrect wages being paid.
Authorisation of Purchases:
Orders up to $5000 are being authorised
by Purchase Manager and over $5000
are by Purchase Director.
This ensures the monitoring of every
purchase and reduces the chances of
unnecessary/ fraudulent expenses and
ensures the genuine purchases needed
for business.
Receiving Goods after Authorisation:
The warehouse dept checks the quality
and quantity of goods received and
agrees with P.O. and raises GRN which
is also being sent to finance dept. This
would ensure the acceptance of those
goods which were actually ordered and
recording the liability of those genuine
goods.
Control Totals:
Purchase invoices are logged into the
system in batches utilising control total,
and clerk signs on the batch control
sheet.
2
of “review conduct by manager”, like
by reviewing his/her logged in time/ trail.
Also discuss their investigation process in
case of any unauthorised changes.
Obtain the sample of reperformed
payslips by the supervisor and compare
with the system calculations and discuss
the investigation process of
discrepancies.
Also check for the sign of payroll
supervisor on the payslips, as evidence of
review of calculation.
Obtain sample of purchase orders, both
below and above $5000, and agree the
sign of purchase manager on orders
below $5000 and sign of P.D. on orders
above $5000.
Visit the warehouse and observe the
goods receiving process to ensure the
team is agreeing goods with the P.O. and
raises GRN; and check for the copy of
GRN in finance dept.
Access the system using CAATs, review
the evidence of control total. Enter the
dummy invoices to ensure control total
operates for accuracy and completeness.
This would ensure accurate and complete
recording of invoices and reducing the
chances of incorrect amounts being paid
to suppliers.
Supplier Statement Reconciliation:
Supplier statement reconciliations are
performed every month. All differences
are fully investigated, and financial
controller review these reconciliations,
which will prevent any extra payment and
make sure that co is only paying what
they owe. Investigation of any difference
can also be done easily and on time.
FD authorises Bank transfer list:
FD authorises Bank transfer of payment
list for suppliers having first agreed the
amount to be paid to supporting
documentation and having first agreed
the amount to be paid to supporting docs
and having reviewed the list for duplicate
payments.
This can ensure only genuine payments
and little to no chances of fraudulent or
extra payments to suppliers (collision with
supplier).
3
Agree the signature of clerk on the batch
control sheet.
Obtain supplier statement reconciliations
on sample basis, check for FC signature
as evidence of review. Also discuss and
check what procedures are being taken
on any discrepancies and differences
occurred.
Reperform the sample of reconciliation to
ensure its accuracy and completeness.
Obtain and check bank transfer list to
check signature/ authorisation of review
by FD.
Enquire of accounts staff what supporting
documentation the finance director
requests when undertaking this review.