ACCA F8 - Audit and Assurance Revision Kit 2016

Deficiency Consequence of deficiency Recommendation
Shift workers can log in and
out just by using their
electronic identification cards.
Overtime is not authorised
appropriately or monitored.
The code word for the time
recording system is generally
known within the department.
Payments into workers' bank
accounts are made by one
member of accounts staff,
without any authorisation.
Review of wages payments is
done every few weeks by the
financial accountant,
seemingly on an ad hoc basis.
Workers can be paid even if they are
not working because the time
recording system logs them in and
out when their cards are scanned and
they are paid from and to this time.
Workers could be paid at overtime
rates when they are not actually
working and could collude with the
shift foreman for extra overtime
without actually working it.
Unauthorised individuals could log
onto the system and enter extra hours
so that they are paid more than they
should be. Fictitious employees could
also be set up on the system.
Unauthorised payments into workers'
and fictitious bank accounts could be
made.
There is no regular monitoring of
wages by senior management.
The shift manager should agree
the number of workers with the
computer records at the start and
end of the shift.
All requests for overtime must be
authorised by the shift manager.
Overtime costs should also be
monitored regularly.
The code word should be
changed immediately to one
containing random letters and
numbers. The system should be
set up so that the code word has
to be changed on a regular basis,
such as every six weeks.
The payroll should be authorised
by the Finance Director or
another senior manager prior to
payments being made.
The Finance Director should
review payroll costs on a weekly
basis so that he can assess
whether they are reasonable and
any unusual amounts can be
investigated.
This letter has been produced for the sole use of your company. It must not be disclosed to a third party, or
quoted or referred to, without our written consent. No responsibility is assumed by us to any other person.
(c)
We should like to take this opportunity of thanking your staff for their co-operation and assistance during
the course of our audit.
Yours faithfully
ABC & Co
(Note: Only four deficiencies, consequences and recommendations were required.)
Substantive analytical procedures
(i) Perform a proof in total of the salaries charge for the year using the prior year charge and increasing
it for the pay increase and taking account of any starters or leavers in the period.
The figures should be comparable with the exception of the salary increase and any starters or
leavers in the year.
(ii)
(iii)
Perform a comparison of the annual charge to the prior year and to the budgeted figure. Where the
variance is significant, investigate further to ascertain why.
The figures should be comparable with the exception of the salary increase of 3%.
Review monthly salaries month by month.
The figures should be about the same each month, except for July and November when the pay rise
and annual bonus were paid respectively. Any starters or leavers would also be reflected in the
relevant month.
120 Answers