Task 3: Payroll

Question 1

A written record such as contract of employment is kept for each employee containing details of rates of pay and contracted hours.

any changes require appropriate authorisation

Answer 1

Could be changed in error - Incorrect pay calculation
(eg OT hours)

Could be changed deliberately to defraud.
Pay for work not done or at wrong rate.

Question 2

Formal procedures are followed for starters & leavers

Answer 2

Paying people who are not employees. ie have left the company.

Failure to pay new people

Payment of ghost workers

Question 3

Timesheets and clock cards are approved before hours are entered onto the payroll system

Answer 3

Could pay for hours not worked.

Deliberate or error.

Question 4

Access to payroll office is restricted to authorised personnal only

Answer 4

Data protection/ Confidentiality

Question 5

Access to payroll and staff records is restricted to authorised personnel only

Answer 5

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Question 6

All changes to rates of pay, bonus payments and commission should be authorised

Answer 6

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Question 7

Written approval from employees should be obtained for all voluntary deductions

Answer 7

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Question 8

All timesheets to be added up to ensure accuracy

Answer 8

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Question 9

Up to date versions of payroll software should e installed using latest tax and NI rates

Answer 9

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Question 10

Staff are fully trained on PAYE and NI issues (and software)

Answer 10

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Question 11

Changes to staff Tax Codes are promptly and accurately on the payroll system

Answer 11

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Question 12

Payroll schedules are approved before payment

Answer 12

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Question 13

Wages control account is regularly reconciled

Answer 13

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Question 14

Commissions & Bonuses are reconciled to source documants (eg sales records)

Answer 14

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Question 15

Piecework payments are regularly reviewed against levels of work completed

Answer 15

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Question 16

Unusual changes in payments to individuals from month to month are identified.

Answer 16

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Question 17

Remember incorrect amounts paid mean lower profit and bad data used for costing

Answer 17

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Question 18

A timetable for payment of wages and salaries is maintained and adhered to

Answer 18

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Question 19

Staff who count wages in cash are not those who prepare payroll

Answer 19

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Question 20

At least 2 staff handle cash for wages

Answer 20

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Question 21

Cash for payment of wages is stored securely at all times

Answer 21

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Question 22

Payslips are handed to staff personally or sent to home address

Answer 22

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Question 23

Paypackets can only be signed for by the individual staff member

Answer 23

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Question 24

BACS payment schedules are authorised by an appropriate person before processing

Answer 24

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Question 25

A comparison is made between wages paid and budgeted figures for wages by department

Answer 25

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Question 26

A regular check is made of deductions by accounts staff to ensure consistency with previous period deductions

Answer 26

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Question 27

Reconciliations are regularly performed between the total net pay figure and payment shown on the bank statement

Answer 27

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Question 28

A regular review of NI and PAYE accounts to ensure no outstanding balances remain after payment to HMRC

Answer 28

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Question 29

AAT P2

Company operating 2 payrolls

Answer 29

Increases costs by doubling work (running 2 payrolls)

Increases time taken to make extra RTI submissions to HMRC

(So don’t worry about getting 2 marks for essentially the same problem ie. extra time!!)

Question 30

AAT P2

Use of non-standard payroll software

Answer 30

This does not link to

Question 31

If direct deposit is not utilized, someone not otherwise involved with payroll should hand out checks. Any unclaimed checks should be investigated.

Answer 31

Prevent fraud

Question 32

5.8. Financial reporting cycle
The most perfect cycle-specific control system can’t guard against errors and control overrides by management. The following controls help protect against misstated financial reports, and they are at least partially linked to all main accounting cycles presented above.

Formal reviews should be in place over journal entries. For example, if a staff accountant prepares an entry, the controller should review and approve it. If the controller prepares an entry, the CFO should review and approve it.

Financial statements and management reports (e.g., budget to actual) prepared by the accounting system should be reviewed for reasonableness. A monthly financial review by executives and perhaps the board of directors is also a good idea. Frequent high-level reviews can detect unusual trends that might indicate mistakes or fraud.

A company should have written policies about any significant accounting treatments, such as revenue recognition and fixed asset capitalization. These written policies help to assure that accounting treatments are consistent throughout the organization.

Answer 32

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Question 33

An independent member of staff should review the list of employees and approve the net pay list

Answer 33

to check they are all real people and not ficticious.

also checks amount correct and going to correct person

check s theres been no collusion