EX 11-15 Payroll internal control procedures Big Howie\'s Hot Dog Stand is a fas
ID: 2401556 • Letter: E
Question
EX 11-15 Payroll internal control procedures Big Howie's Hot Dog Stand is a fast-food restaurant specializing in hot dogs and hamburg- ers. The store employs 8 full-time and 12 part-time workers. The store's weekly payroll averages $5,600 for all 20 workers. OBJ.3 Big Howie's Hot Dog Stand uses a personal computer to assist in preparing paychecks Each week, the store's accountant collects employee time cards and enters the hours worked into the payroll program. The payroll program calculates each employee's pay and prints a paycheck. The accountant uses a check-signing machine to sign the paychecks. Next, the restaurant's owner authorizes the transfer of funds from the restaurant's regular ba For therw ek her way 12, the antant accidentaily recorded 100 hours worked For the week of May 12, the accountant accidentally recorded 100 hours worked instead of 40 hours for one of the full-time employees. Does Big Howie's Hot Dog Stand have internal controls in place to catch this error? If so, how will this error be detected?Explanation / Answer
In the above case we clearly see that there is no internal control present in the restaurant. The entire procedure of making the payroll and paycheck is governed by one person only, namely accountant. Whereas in case of internal control systems we know that the work of one person is automatically checked by some other person. The entire work is not completed by the single person. There is no division of duties for payroll making. However still we see that there is one security check available through which the wrong entry could be detected, which is the average of all workers pay. This increase will be shown up in the average, but the difference will not be much significant. Still if the average payment is observed it will point out towards the error and it will be shown. Except this small piece of checking we cannot easily find out the wrong payment. Maybe the employee who is receiving higher payment, believes in work ethics and might report the extra amount received.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.