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Required 1. Prepare a flowchart of the Sherman's payroll system. 2. Discuss the risks for payroll fraud in the Sherman Company payroll system. 3. What controls would you implement to reduce the risks?

Required 1. Prepare a flowchart of the Sherman's payroll system. 2. Discuss the risks for payroll fraud in the Sherman Company payroll system. 3. What controls would you implement to reduce the risks?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Topic: payroll processing and fixed asset procedure

Subject: accounting information system

departments. In addition to supervising operations. the supervisors of the departments are responsible for recruiting, hiring, and firing workers within their areas of responsibility. The organization attracts casual labor and experiences a 20 to 30 per- cent turnover rate in employees per year. Employees clock on and off the job each day to record their attendance on time cards. Each department has its own clock machine located in an unattended room away from the main production area. Each week, the supervisors gather the time cards, review them for accuracy, and sign and submit them to the roll department for processing. In addition, the super- visors submit personnel action forms to reflect newly hired and terminated employees. From these docu- ments, the payroll clerk prepares payroll checks and updates the employee records. The supervisor of the payroll department signs the paychecks, which are drawn on the general cash account, and sends them to the department supervisors for distribution to the employees. A payroll register is sent to the cash disbur- sements department where it is filed. pay- Required 1. Prepare a flowchart of the Sherman's payroll system. 3. PAYROLL-RISKS AND CONTROLS 2. Discuss the risks for payroll fraud in the Sherman Company payroll system. Sherman Company employs 400 production, mainte- nance, and janitorial workers in eight separate 3. What controls would you implement to reduce the risks?
Transcribed Image Text:departments. In addition to supervising operations. the supervisors of the departments are responsible for recruiting, hiring, and firing workers within their areas of responsibility. The organization attracts casual labor and experiences a 20 to 30 per- cent turnover rate in employees per year. Employees clock on and off the job each day to record their attendance on time cards. Each department has its own clock machine located in an unattended room away from the main production area. Each week, the supervisors gather the time cards, review them for accuracy, and sign and submit them to the roll department for processing. In addition, the super- visors submit personnel action forms to reflect newly hired and terminated employees. From these docu- ments, the payroll clerk prepares payroll checks and updates the employee records. The supervisor of the payroll department signs the paychecks, which are drawn on the general cash account, and sends them to the department supervisors for distribution to the employees. A payroll register is sent to the cash disbur- sements department where it is filed. pay- Required 1. Prepare a flowchart of the Sherman's payroll system. 3. PAYROLL-RISKS AND CONTROLS 2. Discuss the risks for payroll fraud in the Sherman Company payroll system. Sherman Company employs 400 production, mainte- nance, and janitorial workers in eight separate 3. What controls would you implement to reduce the risks?
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