Reference no: EM132793711

Question - Sammy has been the payroll supervisor at Oprah Inc for ten years. She has never missed a payroll and Ray, the owner of the company, is happy with her conscientiousness and knowledge. This is particularly important, as Ray spends a lot of time on the road drumming up new business, and needs competent personnel back at the office.

There are two accounting personnel at the office, a receptionist, four shipping and receiving personnel, and thirty-five sales people employed by Oprah Inc. Office and shipping/receiving personnel are paid a salary, while the sales people are paid a monthly base salary plus a percentage of their sales, calculated quarterly. The base salary is low, at $20 000, with a 3% commission, calculated based on sales less any bad debts written off related to their customers.

Sammy prints off the sales by customer every month and uses this information to calculate commissions. She then prepares the payroll cheques and gives them to Ray, who signs them and gives them to the sales staff at the monthly sales meeting. The cheques are written against a payroll imprest bank account, kept at a balance of $1,000 and refunded as needed. This account is not reconciled, as the staff are very overworked with the increasing volume of business handled by the company.

Required -

A) Identify control weaknesses and their impact, and provide recommendations for improvement.

B) What is the impact of the control weaknesses upon your audit approach?