Understand the main tasks performed, the most important controls and the possible risks in the two cycles
9 important questions on Understand the main tasks performed, the most important controls and the possible risks in the two cycles
What are the main tasks performed by the personnel department?
o Advertising of vacancies
o Assessment/filtering of suitable applications
o Arrangements of interviews
o Arrangement of trainings
o Management and coordination of evaluations and reviews
- Payroll activities
o Maintenance of payroll master file data
o Provision of personnel action forms to Payroll dept in order to:
- activate new employees
- change the pay rate or job classification of current employees
- change marital status and/or number of dependents
- terminate employees
o Provision of time cards and job tickets to Production dept
What are the main tasks of the production department?
- Collection of completed documents
- Authorization procedures
- Forward job tickets to Cost accounting
- Forward time cards to Payroll dept
What are the main tasks of the payroll department?
- Receipt of reviewed time cards from Production
- Receipt of pay rate and supplemental information from Personnel dept
- Consolidation of time card information into a single transaction file and match with the
payroll master file
- Prepare the payroll register, pay slips, and update payroll master file by calculating:
o Gross pay per employee
o Statutory and voluntary deductions
o Overtime pay
o Net pay
- Enter the information in the employee payroll records
- Prepare paychecks and send them to the distributor (paymaster)
- Forward a copy of the payroll register to Accounts payable
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What are the main tasks of accounts payable?
- Approve payroll register
- Prepare a cash disbursements voucher for the total amount of the payroll
- Send copies to the Cash Disbursements and GL depts.
What are the main tasks of the cash disbursement?
- Review, compare and reconcile payroll register and disbursement voucher
- Authorize transfer of funds into payroll imprest account
- Send the journal voucher to GL
o Europe
Submit payment to bank for transfer to employee bank accounts (rather
than using paychecks)
Send pay slips to employees’ home address (received from payroll dept)
o United States
Review and sign the paychecks and forward them to a paymaster for
distribution to the employees
What are the threats for the payroll process?
o Personnel action form, keep records current, SOD
- Duplication of payments to employees
o SOD
- Fraudulent alteration of employee pay
o SOD
- Input of incorrect payroll data (e.g., hours worked)
o Supervision
- Inaccurate calculation of payroll payments
o Independent verification
- Theft of payroll payments
o Access controls
- Loss/alteration/disclosure of payroll data
- Incorrect allocation of payroll expenditure
o Independent verification
What are the risks and controls of the fixed asset process?
- Users have custody of the assets and maintain usage records
- The assets involved are particularly subject to misappropriation
- User can overstate mileage to accelerate the depreciation on a vehicle to reduce the book
value of the asset
- Supervisor has discretion to dispose of the asset
- An over-depreciated asset can be sold at a fraction of its real value to the employee
Controls:
- Periodic audits of the assets to verify their mileage and condition
- Formal procedures for disposal of assets by an independent group
- Recordkeeping by someone else than supervisors
What are the tasks of production operations?
- Delivers materials
Work centers
- Perform production tasks > move tickets allow batch to move on > also record labor time
Inventory control
- Provides status reports on finished goods and raw materials inventory
- Updating raw materials inventory records from materials requisitions
- Recording completed production in the finished goods inventory
Cost accounting
- Record the financial effects of the physical events that occur in the production process
What are the threats and controls of the conversion cycle process?
- Work order, move tickets, materials requisitions
Segregation of duties
- Production planning and control / work centers
- Inventory control / warehouse
- Cost accounting / work centers
Supervision
- In work centers: usage of materials and timekeeping activities
Accounting records
- Tracing from finished products to raw materials
Access controls
- Physical access to assets, pre-numbered documents
- Use of standard costs (and quantities)
Independent verification
- Reconciliation performed by cost accounting
- GL department checks movements from WIP to finished goods
- Physical count of raw materials and finished goods inventories
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