Reference no: EM13166230

AFR Company's internal audit function recently completed an audit of the Company's various employee benefit plans.  The internal auditors' working papers contain the following audit observation:

Savings Plan Contributions Made to Ineligible Employees' Accounts

AFR Company has an employee savings plan that provides a matching contribution to participating employees' savings accounts.  When an employee stops participating in the plan, the Company suspends matching contributions.  During the internal audit function's examination of the plan, we found that the Company was still making contributions to the accounts of a number of employees who had ceased to participate.  No one in the human resources department or in payroll has the specific responsibility of updating the contribution matching database when an employee leaves the Company or drops out of the program or for periodically checking to see that appropriate levels of matching contributions have been made. More than $85,000 had been contributed to such accounts.  Management now is trying to recover erroneous company contributions.

A. Complete the following observation development form base on the information presented above.

Condition:

Criteria:

Effect:

Cause:

B. Given this information, develop a recommendation to address the observation.