Internal Controls/ Weakness/Recommendations:
General Controls: Supervision and review by management, segregation of duties, rotation of duties, personnel take leave regular, internal audit function, sufficient stationery control, scrutinize all records/documents, test castings and calculations.
Validity and Authorisation: All recorded wages are valid and supported by proper documentation. The total wages, deductions and payroll are reviewed by senior employee, and signed as
evidence of this check. There should be complete records kept for every employee, in the employee file. Further,
the foreman should be aware of the number of employees working under him.
Completeness: All valid payroll transactions are recorded and nothing is left out. During the wage pay-out, every employee should collect only his own pay packet, and should sign once payment has been collected. Employees should not be allowed to collect payments on behalf of other employees. There should be sufficient segregation of duties in the payroll cycle, and sufficiently documented procedures with regard to granting of staff loans. There should be strict and tight controls over the clocking in of employees, the preparation of the payroll and the payment of the wages, as described above in the module.
Accuracy: Payroll transaction are shown at the correct amounts. The Human Resources manager should review and authorisation (via signature) the payroll
after performing the following: The total per the payroll agrees to the sum of the wage cheque paid over to the
employee and the cheque paid over to the relevant authorities.
Recording: All purchase transactions are correctly recorded. The hours recorded on the payroll should be obtained directly from the clock card machine report or computer-transaction file. The wage rates, deductions should be obtained from personnel records or master files. The calculations and castings should be reviewed by an independent person (e.g. one wage clerk checks another clerks work/edit checks). The reviewer needs to sign as evidence of review. Before payments can be authorised, senior personnel, should inspect the payroll and week to-week reconciliations need to be performed. All personnel should sign payroll as proof of functions performed.
Cut-Off: All payroll transactions are recorded in the correct reporting period. A strict monthly schedule should be developed for: Posting the entries to raise the liabilities for the deductions, Making the necessary payments on a timeous basis, and Supervisory checks on the above activities.