EX 10-15 Internal control procedures OBI. 3 Dave\'s Scooters is a small manufact

Question

EX 10-15 Internal control procedures OBI. 3 Dave's Scooters is a small manufacturer of specialty scooters. The company employs 14 production workers and four administrative persons. The following procedures are used to process the company's weekly payroll: a. Whenever an employee receives a pay raise, the supervisor must fill out a wage adjust- ment form, which is signed by the company president. This form is used to change b. All employees are required to record their hours worked by clocking in and out on a time clock area at lunch time, management has not objected to having one employee Continued) the employee's wage rate in the payroll system. time clock. Employees must clock out for lunch break. Due to congestion around the clock in and out for an entire department urrent Liabilities and Payroll c. Whenever a salaried employee is terminated, Personnel authorizes Payroll to remove the employee from the payroll system. However, this procedure is not required when an hourly worker is fired. Hourly employees only receive a paycheck if their time cards show hours worked. The computer automatically drops an employee from the payroll system when that employee has six consecutive weeks with no hours worked. d. Paychecks are signed by using a check-signing machine. This machine is located in the main office so that it can be easily accessed by anyone needing a check signed. e. Dave's Scooters maintains a separate checking account for payroll checks. Each week, the total net pay for all employees is transferred from the company's regular bank account to the payroll account. State whether each of the procedures is appropriate or inappropriate, after con sidering the principles of internal control. If a procedure is inappropriate, describe the appropriate procedure.

Explanation / Answer

a. Appropriate

b. Inappropriate because due to congestion around the time clock area at lunch time can be solved by fixing appropriate time frame of defined workers when they should clock in and out. So that particular number of employees can be clock in and out there by congestion problem resolves.

c. Appropriate

d. Inappropriate because week internal controls are placed in the main office which is giving easily free access to anyone needing a check signed. As unauthorized may write the desired amount on check and get it signed very easily with free access.

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