Question

Explain the risks, controls and control classification that arise in the following cases.

• An inadvertent data entry error caused an employee’s wage rate to be overstated in the payroll master file.

• A fictitious employee payroll record was added to the payroll master file.

• A computer operator used an online terminal to increase her own salary.

• A factory employee punched a friend’s time card in at 1:00 P.M. and out at 5:00 P.M. while the

  friend played golf that afternoon.

• Some time cards were lost during payroll preparation; consequently, when paychecks were

  distributed, several employees complained about not being paid.

  Source: Romney, Marshall, et al. Accounting Information Systems Australasian Edition. Pearson Higher Education AU, 2012.

  In the table below:

  (a) Identify five (5) risks present in the previously listed activities. (1.5 mark each= 7.5 marks)
  (b) Recommend a control for each of the risks you identified. (1.5 mark each = 7.5 marks)
  (c) Classify each of the control activities as preventive, detective, or corrective. (1 mark each = 5 marks)

Answer 1

Risks in the given activites An Inadvestent data enty eo Coused an rdte to be oves staoted in the emmplojees ocge PaYSoll magtes file: hni5 calculation γ.İSK added fictitio employee Pajzsol) 3eoxa oos oddea of Ryol mistake to incense hes owr Salat Inoxect Pso)acion Salowj' affecting ơveðaucfficiency aftre Rysoll. At toopm and at S:00 f ie the ten Pasea golF -that aftesnoon: Fioudulent tme keepi me time cads uere cks wese dist-siblted, onseyuentü. When sevesal emloyees Complained asout nt bei 3 Paid Tn Cowect Po cSin of cs Scanned with CamScanner