AUI3702 ASSIGNMENT 2 SEMESTER 2 OF 2024
1.1 Describe the purpose of each of the above internal controls (a-j) (10)
a) To ensure that any changes to employees’ pay rates are properly
authorised and documented, preventing unauthorised pay rate changes.
b) To ensure and control employee attendance and prevent unauthorised
access to the workplace, ensuring only legitimate employees enter and
leave the factory
c) To ensure the accuracy of hours worked by employees and prevents
fraudulent or incorrect wage payments based on false or inflated hours.
d) To ensure that wage payments are consistent over time, identifying
any unusual variances or errors in wage calculations before payment is
made.
e) To inform employees of the details of their wages, allowing them to
verify that the amount received is correct and transparent.
f) To ensure accuracy and consistency in the repayment of staff loans
g) To ensure compliance with tax regulations and prevents penalties from late tax
submissions by confirming that tax deductions are paid to the South African
Revenue Services (SARS) on time.
h) To ensure that only qualified and trustworthy employees are hired, reducing the risk
of hiring unqualified or risky personnel.
i) To ensure the accuracy of wage payments and prevents unauthorised or incorrect
electronic transfers to employee bank accounts.
j) To ensure punctuality among employees, increasing productivity and reducing idle
time.
1.2) Compile one audit engagement procedure to test each of the internal controls (a-
j) (15)
a) Select a sample of pay rate amendments and verify that they are supported
by authorised amendment forms and cross-referenced to the relevant
union or wage committee documents.
b) Observe the entry and exit of employees during shift changes to ensure
that security personnel are monitoring access and verify that employee
attendance records are consistent with entry/exit logs.
c) Review a sample of payroll records and compare them to the foremen’s
signed reports on hours worked, ensuring that authorised hours match the
payroll data.
d) Obtain and inspect a sample of period-to-period wage reconciliations and
, check that the financial controller has reviewed and signed off on them.
Investigate any significant variances between periods.
e) Select a sample of employees and confirm with them that they have
received payslips for the relevant periods. Check payslip details against
payroll records to ensure accuracy.
f) Review the system’s calculations for loan deductions for a sample of
employees with staff loans and compare these to loan repayment
agreements to ensure the correct amounts were deducted.
g) Inspect the cash payments journal for evidence that tax payments were
made to SARS on time and verify the tax deduction amounts by comparing
them to employee pay slips.
h) Review a sample of new hires' personnel files and confirm that background
checks were completed and documented before employment was offered.
i) Obtain a sample of wage payments and verify that the financial controller
reviewed and approved the payment schedules before releasing them.
Confirm the accuracy of payment amounts.
j) Select a sample of employees who were late for work multiple times and
review the HR records to verify that warning letters were issued in line with
company policy.
For each scenario (A-E) above indicate the following:
2:1 Function as part of the production and warehousing cycle (5)
2:2 Describe the risk (5)
2:3 Provide control to address the above-mentioned risk (5)
Function Risk Control
(a) Ordering function – The risk of over-ordering or Implement a policy requiring
Ensuring that the right under-ordering components, the Ordering Clerk to check
components are leading to excess inventory or the order history and
ordered based on production delays. warehouse stock before
current stock levels and placing new orders.
demand. Introduce inventory
management software to
track stock levels and order
needs.
1.1 Describe the purpose of each of the above internal controls (a-j) (10)
a) To ensure that any changes to employees’ pay rates are properly
authorised and documented, preventing unauthorised pay rate changes.
b) To ensure and control employee attendance and prevent unauthorised
access to the workplace, ensuring only legitimate employees enter and
leave the factory
c) To ensure the accuracy of hours worked by employees and prevents
fraudulent or incorrect wage payments based on false or inflated hours.
d) To ensure that wage payments are consistent over time, identifying
any unusual variances or errors in wage calculations before payment is
made.
e) To inform employees of the details of their wages, allowing them to
verify that the amount received is correct and transparent.
f) To ensure accuracy and consistency in the repayment of staff loans
g) To ensure compliance with tax regulations and prevents penalties from late tax
submissions by confirming that tax deductions are paid to the South African
Revenue Services (SARS) on time.
h) To ensure that only qualified and trustworthy employees are hired, reducing the risk
of hiring unqualified or risky personnel.
i) To ensure the accuracy of wage payments and prevents unauthorised or incorrect
electronic transfers to employee bank accounts.
j) To ensure punctuality among employees, increasing productivity and reducing idle
time.
1.2) Compile one audit engagement procedure to test each of the internal controls (a-
j) (15)
a) Select a sample of pay rate amendments and verify that they are supported
by authorised amendment forms and cross-referenced to the relevant
union or wage committee documents.
b) Observe the entry and exit of employees during shift changes to ensure
that security personnel are monitoring access and verify that employee
attendance records are consistent with entry/exit logs.
c) Review a sample of payroll records and compare them to the foremen’s
signed reports on hours worked, ensuring that authorised hours match the
payroll data.
d) Obtain and inspect a sample of period-to-period wage reconciliations and
, check that the financial controller has reviewed and signed off on them.
Investigate any significant variances between periods.
e) Select a sample of employees and confirm with them that they have
received payslips for the relevant periods. Check payslip details against
payroll records to ensure accuracy.
f) Review the system’s calculations for loan deductions for a sample of
employees with staff loans and compare these to loan repayment
agreements to ensure the correct amounts were deducted.
g) Inspect the cash payments journal for evidence that tax payments were
made to SARS on time and verify the tax deduction amounts by comparing
them to employee pay slips.
h) Review a sample of new hires' personnel files and confirm that background
checks were completed and documented before employment was offered.
i) Obtain a sample of wage payments and verify that the financial controller
reviewed and approved the payment schedules before releasing them.
Confirm the accuracy of payment amounts.
j) Select a sample of employees who were late for work multiple times and
review the HR records to verify that warning letters were issued in line with
company policy.
For each scenario (A-E) above indicate the following:
2:1 Function as part of the production and warehousing cycle (5)
2:2 Describe the risk (5)
2:3 Provide control to address the above-mentioned risk (5)
Function Risk Control
(a) Ordering function – The risk of over-ordering or Implement a policy requiring
Ensuring that the right under-ordering components, the Ordering Clerk to check
components are leading to excess inventory or the order history and
ordered based on production delays. warehouse stock before
current stock levels and placing new orders.
demand. Introduce inventory
management software to
track stock levels and order
needs.
