The five deficiencies identified in the payroll system of Lowland University include the following:
Deficiency 1:
The payroll system of the university generates the computation of wages and checks are not performed at all. Hence, it would not be possible to detect any type of system error taking place at the time of payroll processing (Alzeban and Sawan 2015). As a result, there might be over or under computation of wages resulting in additional cost of payroll or loss of employee reputation.
Deficiency 2:
The clerks of Lowland University update the increases in annual wages in the standing data of the payroll system. However, the payroll clerks do not possess relevant experience in order to make changes to standing data. As a result, they could make mistakes in the form of wrong payment of wages (Byrnes et al. 2015). Moreover, it would be possible for the clerks to perform unauthorised changes by obtaining access of the standing data.
Deficiency 3:
The pertinent departmental head of Lowland University does not always authorise the overtime work of the employees. This is because overtime in additional of 30% of standard hours needs authorisation. This would raise the risk that the staffs would demand for overtime although they did not work these overtime hours, which would lead to additional payroll costs for the university (Christ et al. 2015).
Deficiency 4:
The overtime hours that the employees work are mailed to the departmental heads and they are involved in reporting by exception in case of any mistakes. However, if the departmental heads have busy schedules and they fail to report payroll within time, it would be assumed that there is no mistake in the overtime report, even if errors might be present (Han et al. 2015). As a result, the payroll department of the university might make wrong overtime payments.
Deficiency 5:
The department heads are assigned with the responsibility for arranging yearly leave cover to ensure authorisation of overtime sheets timely; however, this is not always the case. In case, there is late authorisation of overtime sheets, employee dissatisfaction level would increase due to the delay in payment of the overtime hours worked.
In order to address each of the above-stated deficiencies, Lowland University could adopt the following controls:
Recalculation of pay earnings for mitigating the first deficiency:
Lowland University could provide the responsibility of recalculating the gross to net pay workings for a group of staffs to a senior member of the payroll team. In addition, the personnel would be responsible for contrasting the results to the payroll system output. These computations need to have approval sign before making final payments.
Lowland University needs to restrict the access of its payroll clerks to avoid changes to the standing data. In addition, it needs to assign the responsibility of increase in annual wages to a senior member of its payroll department and another officer needs to be responsible in order to check for errors (Kusumo, Koeswoyo and Handoyo 2018).
Relevant authorisation for mitigating the third deficiency:
It is necessary for all the departmental heads of Lowland University to authorise the overtime hours worked. The evidence needs to be in the form of signature on the weekly overtime sheets of the staffs.
Procedures to process overtime sheets for mitigating the fourth deficiency:
It is necessary for Lowland University to remind the payroll clerks of the procedures to be made at the time of processing the overtime sheets. They need to sign in the form of evidence on the overtime sheets, which they have settled any time taken off to the pertinent overtime report.
Reporting to the payroll department for mitigating the fifth deficiency:
Lowland University needs to make it mandatory for all the departmental heads to report to the payroll department for ascertaining the accuracy of the overtime report. In addition, the follow-up needs to be made on the part of the payroll department in case of any non-replies and it need not make payments until it receives confirmation from the departmental heads.
The test of control for assessing whether each of the controls specified operating effectively is discussed as follows:
Control test for the first deficiency:
A sample of the gross to net pay calculations needs to be reviewed for evidence regarding their undertaking along with the approval sign.
Control test for the second deficiency:
For ensuring the mitigation of this deficiency, the management of Lowland University could ask a clerk for attempting to make modification to the standing data of the payroll system. However, the system needs to reject this specific attempt (Pinto et al. 2014). In addition, reviewing the log related to amendments of standing data is crucial for identifying whether any senior payroll member has changed the increases in wage rates.
Control test for the third deficiency:
In order to deal with the issue related to authorisation of the overtime hours of the staffs, a sample of weekly overtime sheets of the staffs needs to be reviewed for evidence of signature on the part of the pertinent departmental head. Along with this, a sample of overtime sheets needs to be chosen with time taken off and confirmation is required to be made for evidence of a check on the part of payroll clerk to the report of overtime working hours (Raudla et al. 2016).
Control test for the fourth deficiency:
The control test that would be performed for dealing with the fourth deficiency is that for a sample of overtime reports mailed to the departmental heads, it needs to be ensured that each head has provided the response after effective review of all the responses obtained.
Control test for the fifth deficiency:
This deficiency could be dealt with by discussing with the payroll clerks about the procedures they follow in order to gather authorisation of overtime sheets, especially during annual leave periods. This needs to be contrasted with the process, which the payroll clerks need to adopt for detecting any control exceptions (Suryanto 2016).
In the words of Verbruggen et al. (2015), the main aim of the substantive procedures is to detect the material misstatements at the level of assertion. These might take into account tests of transaction details, disclosures, balances and substantive analytical processes. The substantive test is conducted mainly as portion of the final audit. In case of Lowland University, the substantive work to be carried out on payroll at the final audit would include a list of steps to be followed. Firstly, the overall wages and deductions per chosen payrolls need to be agreed to the recorded amounts in the individual nominal or general ledger accounts.
Secondly, it is necessary to carry out the analytical procedures like proof in total of overall payroll by considering the leavers and joiners along with any rise in yearly pay; contrasting any trends to the previous years and discussing considerable variations with the management (Svanberg and Öhman 2015). Thirdly, the conduction of the comparison of overall wages month-by-month with the budgets of the previous year is made along with examining the variations. Finally, sundry payables for outstanding tax at the end of the year are to be agreed with the records of the payroll system along with checking considerable payment to cashbook.
In order to ensure the success of the above-depicted steps, the computers could be used in the form of audit tool and the most inherent instances include audit software and test data. These need to be included during the final audit of wages and salaries. The test data comprises of data that the auditor submits for testing the operation of application controls like checks related to data validation. The test data could be in the form of imputing staff numbers, which do not exist and overtime hours worked per week. The audit software could be used for interrogating the computer files of a client. Examples include comparing staff records on payroll files along with comparing them at the beginning and end of the period.
References:
Alzeban, A. and Sawan, N., 2015. The impact of audit committee characteristics on the implementation of internal audit recommendations. Journal of International Accounting, Auditing and Taxation, 24, pp.61-71.
Byrnes, P.E., Al-Awadhi, C.A., Gullvist, B., Brown-Liburd, H., Teeter, C.R., Warren Jr, J.D. and Vasarhelyi, M., 2015. Evolution of auditing: From the traditional approach to the future audit. Audit Analytics, 71.
Christ, M.H., Masli, A., Sharp, N.Y. and Wood, D.A., 2015. Rotational internal audit programs and financial reporting quality: Do compensating controls help?. Accounting, Organizations and Society, 44, pp.37-59.
Han, S., Rezaee, Z., Xue, L. and Zhang, J.H., 2015. The association between information technology investments and audit risk. Journal of Information Systems, 30(1), pp.93-116.
Kusumo, B.Y.A., Koeswoyo, P.S. and Handoyo, S., 2018. Analyze of the Effect of Workplace Spirituality on Auditor Dysfunctional Behavior and its Implication to Audit Quality: Study at the Audit Board of the Republic of Indonesia. Journal of Accounting Auditing and Business, 1(1), pp.19-33.
Pinto, J., Pereira, A.C., Imoniana, J.O. and Peters, M.R.S., 2014. Role of internal audit in managerial practice in organisations. African Journal of Business Management, 8(2), p.68.
Raudla, R., Taro, K., Agu, C. and Douglas, J.W., 2016. The impact of performance audit on public sector organizations: The case of Estonia. Public Organization Review, 16(2), pp.217-233.
Suryanto, T., 2016. Audit Delay and Its Implication for Fraudulent Financial Reporting: A Study of Companies Listed in the Indonesian Stock Exchange. European Research Studies, 19(1), p.18.
Svanberg, J. and Öhman, P., 2015. Auditors’ identification with their clients: Effects on audit quality. The British Accounting Review, 47(4), pp.395-408.
Verbruggen, S., Christiaens, J., Reheul, A.M. and Van Caneghem, T., 2015. Analysis of audit fees for nonprofits: Resource dependence and agency theory approaches. Nonprofit and Voluntary Sector Quarterly, 44(4), pp.734-754.
We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.
Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.
Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.
Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.
Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.
Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.
We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.
Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.
You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.
Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.
Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.
You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.
You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.
Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.
We create perfect papers according to the guidelines.
We seamlessly edit out errors from your papers.
We thoroughly read your final draft to identify errors.
Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!
Dedication. Quality. Commitment. Punctuality
Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.
We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.
We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.
We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.
We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.