Accounting Information Systems 8th Edition by James Hall

Exercise 12

PAYROLL APPLICATION CONTROL
Using this supplemental information, analyze the flowchart in the diagram for Problem 12.
• The personnel department determines the wage rate of all employees. To start the process, the personnel department sends the payroll coordinator, George Jones, an authorization form to add an employee to the payroll. After Jones enters this information into the system, the computer automatically determines the overtime and shift differential rates for the individual, updating the payroll master files.
• Employees use a time clock to record the hours worked. Every Monday morning, George Jones collects the previous week's timecards and begins the computerized processing of payroll information to produce paychecks the following Friday. Jones then reviews the timecards to ensure that the hours worked are correctly totaled; the system determines overtime and/or any shift differential.
• Jones performs all other processes displayed on the flowchart. The system automatically assigns a sequential number to each payroll check produced. The check stocks are stored in a box next to the computer printer to provide immediate access. After the checks are printed, an automatic check signing machine signs them with an authorized signature plate that Jones keeps locked in a safe.

After the check processing is completed, Jones distributes the checks to the employees, leaving the checks for the second- and third-shift employees with the appropriate shift supervisor. Jones then notifies the data processing department that he is finished with his weekly processing, and data processing makes a backup of the payroll master for storage in the computer room.
Required Identify and describe:
a. areas in the payroll processing system in which the internal controls are inadequate.
b. two areas in the payroll system in which the system controls are satisfactory.