HOLLY COMPANY—PAYROLL SYSTEMS (SMALL COMPANY USES MANUAL PROCEDURES WITH PC SUPPORT) Holly Company is a small family run manufacturer of wooden garden furniture, sheds, and storage con to conduct a review of its internal controls. The focus of your review at this time is the payroll process. Payroll Processing System Holly employees use a time clock in an unsupervised area to record their time on the job. The timekeeping clerk tries to monitor the process but is often distracted by other duties. Every Friday, the shop foremen collect the time cards for their subordinates, review and approve them, and deliver them to the payroll clerk. The payroll clerk uses a stand-alone PC to record the employee earnings in the employee records and print a hard-copy payroll register. The payroll clerk sends one copy of the pay roll register to the accounting department. The clerk then files the time cards and a copy of the payroll register in the payroll department. The accounting department clerk receives the payroll register, reviews it for accuracy, and uses the department computer to record the transaction by posting to subsidiary and GL accounts, including wages expense, cash, and various withholding accounts. The clerk then prints the hard-copy checks, which are written on the general cash account. The clerk signs the paychecks and sends them to the foremen who distribute them to the employees. Finally, the clerk files the pay roll register in the department. Required a. Prepare a data flow diagram of the current system. b. Prepare a system flowchart of the existing system. c. Describe the uncontrolled risks associated with this system as it is currently designed. d. Describe the physical and IT controls needed to reduce the risks identified in “c” above.

BuyFind

Accounting Information Systems

10th Edition
Hall + 1 other
Publisher: Cengage Learning,
ISBN: 9781337619202
BuyFind

Accounting Information Systems

10th Edition
Hall + 1 other
Publisher: Cengage Learning,
ISBN: 9781337619202

Solutions

Chapter
Section
Chapter 6, Problem 1ICC
Textbook Problem

HOLLY COMPANY—PAYROLL SYSTEMS (SMALL COMPANY USES MANUAL PROCEDURES WITH PC SUPPORT)

Holly Company is a small family run manufacturer of wooden garden furniture, sheds, and storage con to conduct a review of its internal controls. The focus of your review at this time is the payroll process.

Payroll Processing System

Holly employees use a time clock in an unsupervised area to record their time on the job. The timekeeping clerk tries to monitor the process but is often distracted by other duties. Every Friday, the shop foremen collect the time cards for their subordinates, review and approve them, and deliver them to the payroll clerk.

The payroll clerk uses a stand-alone PC to record the employee earnings in the employee records and print a hard-copy payroll register. The payroll clerk sends one copy of the pay roll register to the accounting department. The clerk then files the time cards and a copy of the payroll register in the payroll department.

The accounting department clerk receives the payroll register, reviews it for accuracy, and uses the department computer to record the transaction by posting to subsidiary and GL accounts, including wages expense, cash, and various withholding accounts. The clerk then prints the hard-copy checks, which are written on the general cash account. The clerk signs the paychecks and sends them to the foremen who distribute them to the employees. Finally, the clerk files the pay roll register in the department.

Required

  1. a. Prepare a data flow diagram of the current system.
  2. b. Prepare a system flowchart of the existing system.
  3. c. Describe the uncontrolled risks associated with this system as it is currently designed.
  4. d. Describe the physical and IT controls needed to reduce the risks identified in “c” above.

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Chapter 6 Solutions

Accounting Information Systems
Ch. 6 - What are the objectives of a fixed asset system?Ch. 6 - How do fixed asset systems differ from purchases...Ch. 6 - What are three tasks of the fixed asset system?Ch. 6 - What information is found on the depreciation...Ch. 6 - Why is it crucial to the integrity of the...Ch. 6 - What is the auditors role with respect to the...Ch. 6 - Which department performs the formal recordkeeping...Ch. 6 - What document shows when fixed assets are fully...Ch. 6 - Who should authorize disposal of fixed assets?Ch. 6 - Assets used for production are secured in a...Ch. 6 - What is the importance of the job ticket?...Ch. 6 - Are any time lags in recording economic events...Ch. 6 - The management of an organization with a remote...Ch. 6 - Discuss the main advantages of payroll...Ch. 6 - Discuss some specific examples in which...Ch. 6 - Discuss some service industries that may require...Ch. 6 - What are the risks associated with payroll...Ch. 6 - If an asset that is not fully depreciated is sold...Ch. 6 - Discuss the fundamental risk and control issues...Ch. 6 - Describe an internal control that would prevent an...Ch. 6 - Describe an internal control that would prevent...Ch. 6 - Describe an internal control that would prevent...Ch. 6 - Describe an internal control that would prevent...Ch. 6 - What negative consequences result when fixed asset...Ch. 6 - Which one of the following functions is...Ch. 6 - Which of the following is not a payroll system...Ch. 6 - An independent verification control in the payroll...Ch. 6 - Who below is most likely to distribute paychecks?...Ch. 6 - Which one of the following documents captures the...Ch. 6 - Which of the following are not fixed asset system...Ch. 6 - All of the following controls are likely to apply...Ch. 6 - All of the following data items are likely to be...Ch. 6 - The following are all transactions processed in...Ch. 6 - Which one of the following documents captures the...Ch. 6 - PAYROLL FRAUD John Smith worked in the stockyard...Ch. 6 - PAYROLL CONTROLS Refer to the flowchart for...Ch. 6 - PAYROLLRISKS AND CONTROLS Sherman Company employs...Ch. 6 - FLOWCHART ANALYSIS Discuss any control weaknesses...Ch. 6 - SEPARATION OF DUTIES Human resource management...Ch. 6 - PAYROLL FLOWCHART ANALYSIS Discuss the risks...Ch. 6 - COMPREHENSIVE FLOWCHART ANALYSIS Discuss the...Ch. 6 - FIXED ASSET SYSTEM-RISKS AND CONTROLS The fixed...Ch. 6 - FIXED ASSET SYSTEM-FRAUD POTENTIAL Holder Co....Ch. 6 - FIXED ASSET FLOWCHART ANALYSIS Discuss the risks...Ch. 6 - PAYROLL PROCEDURES The following describes the...Ch. 6 - PAYROLL FLOWCHART ANALYSIS Discuss the risks...Ch. 6 - HOLLY COMPANYPAYROLL SYSTEMS (SMALL COMPANY USES...Ch. 6 - GREEN POND NURSERY (STANDALONE PC-BASED ACCOUNTING...Ch. 6 - TURNER PATIO FURNITURE (MANUAL AND STAND-ALONE PC...Ch. 6 - GENERATORS R US (MANUAL AND STAND-ALONE PC...Ch. 6 - OUTDOOR ADVENTURE: WHITE WATER AND CAMPING...Ch. 6 - CLASSIC RESTORATIONS (MANUAL AND STAND-ALONE...

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