Reference no: EM132652658

Question - You are the auditor of Dynamic Cloths Ltd. The company manufactures clothing for the fashion industry. A production manager heads the manufacturing division. He controls the work of 20 foremen and approximately 500 workers. Wages are paid every Friday, based on hours worked during the previous calendar week.

New workers are employed by the foremen. At the start of each working week (Monday) each foreman hands a blank clock card to each of its workers. The workers insert their names and employee numbers on the clock cards and then use the cards for that working week. The clocking device is situated at the entrance to the factory. Workers clock in and out at the entrance to the factory by inserting their clock cards in the clocking device.

The foremen hand the used clock cards to the wage clerk on Monday mornings. The clock cards are divided alphabetically amongst four wage clerks. Each clerk is always allocated the same section of the alphabet for which he is fully responsible.

The clerks perform the following work on the clock cards:

1. Calculate the total number of hours worked per each clock card and record this on the relevant clock card.

2. Enter the hours worked per individual (by employee number) into the weekly wages file on the computer.

After each wage clerk has entered the hours worked into the computer, the computer calculates each worker's gross pay, deductions and net pay by using the wage rates and deductions in accordance with the personnel information kept on a database. The weekly wages report is then printed by the computer. This report is kept in the wages department.

One of the wage clerks verbally informs the accountant of the amount needed for the week's net wages. The accountant then prepares cash cheque for the exact amount of the week's net wages after which the cheque is cashed by a wage clerk.

The computer prints pay envelopes for the workers to be paid, bearing the worker's names and employee numbers. Each wage clerk fills the pay envelopes according to the letters of the alphabet for which he is responsible. After all the pay envelopes are filled, no money should be left over, if a discrepancy occurs the pay envelopes are checked and corrected by the wage clerk.

The envelopes are then sealed. On Friday afternoon the pay envelopes are handed to the relevant foreman for the weekly payout. Each foreman pays out the wages to the workers working for him. Unclaimed wages are returned by the various foremen to a wage clerk.

Required - Identify the weaknesses in the wage system described above and recommend improvements for each weakness identified.