You have recently been appointed as an accountant at LQOH, a Harrogate based firm of certified accountants.
You are currently reviewing the payroll system of PLT plc. The company is a small local manufacturing company with an annual turnover of £4.2m and an annual net profit of approximately £1.2m. The company currently employs a factory workforce of 56 employees and has an annual factory wage bill of £2.2m.
The following document flowchart (see Figure 9.12) of PLT’s factory payroll system was prepared during the last systems audit of the company approximately three months ago.
Required
Based on the above flowchart, identify and describe the weaknesses within PLT’s factory payroll system and recommend possible areas for improvement.
PU = Payroll update; TC= Timecards; PR= Payroll register; PC= Payroll cheque; HWS = Hours worked summary,
Events/activities
1. Personal file reviewed and timecards prepared.
2. Timecards used to record hours worked.
3. Timecards submitted for approval on a weekly basis.
4. Timecards review and authorized – hours worked noted.
5. Hours worked calculated and overtime hours worked noted.
6. Employee status checked and pay rate and deductions confirmed.
7. Gross pay and net pay are calculated and payroll register prepared.
8. Payrall register details checked and confirmed.
9. Sequentially numbered cheques are prepared for each employee.
10. Gross pay and net pay calculations are checked and the sequence of cheques confirmed.
11. Hours Worked and overtime worked verified.
12. Employee’s identity confirmed and all cheques signed (using automated cheque signing machine).
13. Chequessentto Finance for distribution to employees.
Figure 9.12 PLT plc payroll system – document flowchart