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Pay Rolls and Internal Audit - Essay Example

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This essay "Pay Rolls and Internal Audit"  discusses the lack of internal controls in internal audits. The two-way obligations between various departments will solve many problems regarding the preparation of payrolls and cover important aspects of internal audit…
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Pay Rolls and Internal Audit
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Pay Rolls and Internal Audit The report discusses the lack of internal controls in internal audit. The internal controls are regarding communicationsbetween the departments and between branches of the company. The two way obligations between various departments will solve many problems regarding the preparation of pay rolls and cover important aspects of internal audit. The policies, procedures and controls that are exercised in preparation of payroll of management, staff, non salaried employees, supervisors, administrators, company staff, line and field workers, maintenance and cleaning staff were discussed and the two way obligations suggested. No lapses were found in the management of pay roll or audit but the need to strengthen the control and improve the process of payment and audit in order to make process more and more accurate and transparent regarding the payment procedure were suggested. The need of strengthening of control of staff pay roll advances, and the need of obtaining additional and timely information from the HR department to ensure maintenance of better personal records was stressed. There was significant progress achieved through installation of computerized system for this purpose. The process of reviewing and procedures of documenting must take into consideration the gradual computerization of the process along with addressing the issues like leave on loss of pay and the adjustments made for that purpose. There is a need to make arrangements to produce salary statements according to the revised schemes in order to enable payroll department to distribute the sample for verification of major key salary elements on the personnel data bank. The process of staff pay roll advances can be strengthened through analysis and regular follow up of accounts. The outstanding dues are liable to review and should be brought up to date. The HR department should discuss with Payroll Unit regarding providing a list of appointments, extension, cessations, leave for loss of pay for both regular and contract staff for ensuring a proper tallying of personnel records with pay roll records. If this type of communication is done manually or not done regularly, its effect on HR department will be costly. As the system was computerized it is now possible to obtain this information but there is a need of maintaining a database named personnel information system. Right now the work of personnel information department also was maintained by payroll unit only. This is making the system less efficient and even less accurate due to the non availability of up to date information. Regarding the large number of alternate arrangements due to absence of staff, non appointment of regular staff, the lack of staff due to leaves on loss of pay; they involve an increment in cost to the company. Necessary steps were not taken to regularize the monitoring on these things and even to reduce the increment of pay due to these arrangements. The review of payments processed by payment authorities is also important. This type of reviews result in strengthening control over travel expensed by reviewing travel claims and assurance that all travel is verified to feasible extent. The airline boarding passes, train tickets verification must be reviewed. The review can cover the travel expenses of permanent travelers, frequent travelers and the personnel traveling less often. The differences in the procedures must be studied and the verification process can be done with the knowledge of pay roll department to avoid complications as they will be in constant contact with the data base of all the staff. ( if the data base was provided. A recommendation for that type of data base was done earlier in the paper. No information of existing database was given in the information of the company) The proposal of informing the instructions issued to managers of different departments who approve the payments to pay toll department can be mooted to make two obligations between payroll and internal audit more reasonable. This makes the pay roll department to work in tandem with various departments. The details about the travelers mentioned early in this paper can be made known to the pay roll department through HR department. The definitions of permanent, frequent and less often travelers can be made known to the pay roll department. So that they can verify the claims from the various department and can reduce flaws if any. This suggestion is worth enough to include in the future databases that are developed in the systems shared by pay roll and HR departments. The monitoring of the accounts can be improved if the recommendations regarding the advances taken by staff, outstanding balances and information about different payments had included in the database shared by pay roll unit and HR department. The above mentioned recommendations are capable of decentralizing the process of pay roll. The advances of staff regarding travel and salary can be handled in the field by keeping them in the database. This thing will be useful in briefing sessions with the directors, mangers and external officers. Now let us consider the three types of salary pay rolls existing in the company. In first type of pay roll, which is monthly one involves payments of head office and factory management. These monthly payments are the salaries of top management and other employees regarding them. These payments have different issues like advances of salary and frequent travel expenses. The verification of deductions in salary for the repayment of advances along with payment of travel expenses between head office and branches. Along with Coventry there are two factories in Glasgow and North London. The management and officials who are traveling between these three places will have different type of payments. As mentioned above an assistant in Pay roll Unit can deal with the payments of these people regarding travels and advances by updating the database maintained for it. These things, when reach the payroll unit will help a lot to make the preparation of pay rolls easy. The account for payment of advances regarding salary and travel must be different from the accounts for the same purpose for the remaining two type of pay rolls. These account details must be available for pay roll manager to verify the deductions and payments. As these payments only deal with Bacs all the amount will be transferred to the employees accounts and con be considered for the calculation easily. In the second case of fortnightly payment the supervisors, factory office administrators and canteen staff were involved. These payments were done by Bacs and cheques. These payments also involve reasonable number of advances but less employees who travel frequently. An assistant in payroll unit is necessary to deal with these things and to keep the particular database accessible to pay roll unit. The information about cheque numbers and dates of credit of amounts in the banks should be available in the database. The difference in the database of the first category and the second category of the payments is the first one need not have a field for the cheque payment but this database should have it. Thought the travel of these employees is less it will be substantial to maintain an account. The details of payments done through this account should be available for the purpose of internal audit and for the needs of pay roll department to pay for the necessary things and even deduction in the case of advances regarding salary and travel. As the payment through this type of pay roll involves both bacs and cheques the database will have characters of both first and second categories. They have to maintain the details of bank account credits along with transfer of amount due to deposit of cheques. These two involve different representation in the accounts, they must be made available to internal audit in two different ways with a single head account. The third type of pay roll involves weekly payment and the workers paid are personnel working with machinery, cleaning staff and line workers. These people also have less advances as they receive the salary on a weekly basis. If there are any advance cases are there, they would be some loans granted by management for special purposes. The advances taken in this category involve weekly deduction as they receive weekly payment. The database must be upgraded on a regular basis because if the information about advance did not reach the pay roll unit the cheque will go for full with out deduction. This results in loss to the company. These things are also can be dealt by one of three assistants in the pay roll unit. The workers or employees who travel are less in the third category. So, one may feel that no separate mechanism is necessary for maintaining that. But if there is no head to maintain it the expenses travels of these personnel, which happen very less often cannot be defined and there will be no control over the payment of the advances that occur just now and then. The assistant who is dealing the first type of category can deal with the factors like controlling of staff advances, which was mentioned earlier in this paper. The assistant must work under continuous supervision of the supervisor because this factor involves the payment of travel advances. If any unnecessary reduction of payment or overlook in deciding the amount to pay for advance for travel, it may result in effecting the work of employee in the travel and extra cost for the management respectively. The assistant dealing with the second category of pay roll can deal with the details involving the cost to the company. As he is dealing with the database that involves both bacs and cheques he is capable of dealing with both type of payments. The advances regarding salary generally paid through bacs and the travel advances will be paid through cheque. So the person who is dealing with both the types is appropriate to deal with them. The monthly review of outstanding dues of the employees regarding their advances and other recoveries can be dealt by the third assistant who deals with last category of payments. He must report every week, fortnight and monthly reviews about advances and other recoveries to his supervisor. This enables supervisor to answer the questions regarding the budget in special reviews. The two way obligations: Till now the information that can be put available to pay roll unit was discussed and the communication of pay roll department to the other departments was not discussed properly. The supervisor in the pay roll department can deal with the way of communicating with the other departments regarding the payments and recoveries in that department. The assistants must provide him with information that is in the form of spread sheets, which is easily understandable and even in a position to serve the purposes of the internal auditor. The Pay roll manager will report to HR director and he must be in a position to deal with the information in different department regarding payments. He can interact with the managers and heads of different departments regarding the accuracy in pay rolls and payment reports. The various issues that can be dealt by Pay roll manager are: advances regarding employees in I II and III category pay rolls and the travel advances of I II and III category pay rolls. The decisions, which are taken by managers heading different departments affect the way of disbursing the advances to the employees. Pay roll manager must be aware of changes happening in all the departments and must make his staff to follow the changes to suit the needs. Whenever the change is made the manager will convey that to his staff and can see the report regarding change of payments be sent to that particular department. This type of two way obligation will help in accurate pay roll and timely internal audit because information will be upgraded whenever needed and the auditor's work of removing the lapses of internal controls can be met. 1. Governing Body, 1999, Follow-up on the report of the Chief Internal auditor for the year ended 31 December 1997, International labour organization, ,electronic, 15-09-06, http://www.ilo.org/public/english/standards/relm/gb/docs/gb274/pfa-2.htm 2.Author not found, 2005, financial accounting operations, Windham-Ashland-Jewett entral School District, ,electronic, 15-09-06, http://64.233.187.104/searchq=cache:9azhB2Vve3wJ:www.osc.state.ny.us/localgov/audits/2005/schools/waj.pdf+internal+controls,+pay+rolls,+internal+audit,+two+way+obligations&hl=en&gl=in&ct=clnk&cd=15&lr=lang_en Read More
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