Question

Accounting Information System

The following is a description of the payroll procedures for Cherokee Custom Crafters Sdn Bhd, a small company that customizes vans and RVs according to customers' specifications: Jabatan pemprosesan gaji menyediakan kad masa untuk setiap pekerja pada setiap hari Isnin dan meniggalkan kad tersebut di dalam sebuah kotak berdekatan dengan pintu masuk ke kilang. Pekerja akan mengisi masa mereka setiap hari. The payroll department prepares a time card for each employee on the payroll every Monday and leaves the time cards in a box near the entrance to the factory. Workers fill in their time daily.

Answer 1

Answer: The following are the five recommendations for improving Cherokee Custom Crafters internal controls over its payroll function.

1) The responsibility of leaving the time cards of the employees prepared by the payroll department in a box near the entrance to the factory should be given to the employee of different department but not from the same payroll department. This will improve the system since identity of the employee will not be shared and secrecy will also be maintained which in turn will eliminate the chance of filling the time of some employee even if there are not present.

2) Bigger size clock should be installed with siren at factory gate and siren should be blown at the time of closing of entry time at factory as well as during exit time at factory. This is improve in giving correct attendance days and also the correct timing of hours worked by the employee.

3) A payroll clerk should not be given responsibility for checking and inputting of several employees hours alone in a computer which may lead to submission of faulty time card. It should be distributed among various people.

4) Integrity of all payroll clerk including newly recruited one should be investigated by sudden check on a regular basis. Proper qualified employee with good experience should be employed who will make a sample check of the payroll register to ensure about its correctness.

5) Instead of manual preparation of check it should be computer generated and accordingly proper computerization should be done. After preparation of checks it should checked and signed by two persons such as the person who is authorized to discharge this function and then by the chief accountant. Before distribution of the check, proper communication through e-mails or any other method as deemed fit should be done so that correct employee should be present while accepting and collecting the checks. After taking the checks the employee should sign the check disbursement register. Same chief accountant should not be given responsibility for preparation of the monthly reconciliation of the payroll bank accounts every time instead there should a rotation among themselves.