Reference no: EM132546008

Point 1: Silver Inc. operate several chemical processing factories across the country, it manufactures 24 hours a day, seven days a week and employees work a standard shift of eight hours and are paid for hours worked at an hourly rate. Factory employees are paid weekly, with approximately 80% being paid by bank transfer and 20% in cash; the different payment methods are due to employee preferences and Silver Inc. has no plans to change these methods. The administration and sales teams are paid monthly by bank transfer.

Point 2: Factory staff are each issued a sequentially numbered clock card which details their employee number and name. Employees swipe their cards at the beginning and end of the eight-hour shift and this process is not supervised. During the shift employees are entitled to a 30-minute paid break and employees do not need to clock out to access the dining area. Clock card data links into the payroll system, which automatically calculates gross and net pay along with any statutory deductions. The payroll supervisor for each payment run checks on a sample basis some of these calculations to ensure the system is operating effectively.

Point 3: Silver Inc. has a human resources department which is responsible for setting up new permanent employees. Appointments of temporary staff are made by factory production supervisors. Occasionally overtime is required of factory staff, usually to fill gaps caused by staff holidays. Overtime reports which detail the amount of overtime worked are sent out quarterly by the payroll department to production supervisors for their review.

Point 4: To encourage staff to attend work on time for all shifts Silver Inc. pays a discretionary bonus every six months to factory staff; the production supervisors determine the amounts to be paid. This is communicated in writing by the production supervisors to the payroll department and the bonus is input by a clerk into the system.

Point 5: For employees paid by bank transfer, the payroll manager reviews the list of the payments and agrees to the payroll records prior to authorizing the bank payment. If any changes are required, the payroll manager amends the records.

Point 6: For employees paid in cash, the pay packets are prepared in the payroll department and a clerk distributes them to employees; as she knows most of these individuals she does not require proof of identity.

Question 1: Identify FIVE internal control STRENGTHS in Silver Inc. payroll system.

Question 2: Identify SIX internal control DEFICIENCIES in Silver Inc. payroll system. Can you think of any RECOMMENDATIONS to address each of these deficiencies.