SEMESTER SPRING 2012 FUNDAMENTALS OF AUDITING ( ACC311) Assignment No.

1
Due Date: 26-04-2012
Weakness Of Internal Control System

Marks: 15

Ahmad & Co. is a construction company having large workforce for its different work sites. Wages system is being reviewed in the entity by an audit team. Following information is available about the wages system. At the time of entrance and exit, workers punch their job cards on the clock system for recording of working hours. The machine punches the current date and time on the card. A foreman has been appointed on every site to monitor the workers. He also issues temporary entry cards and worker numbers to labor force hired on temporary basis. Computerized system calculates overtime based on the input of overtime hours reported by respective foreman and adds it to workers pay. Computerized pay system is managed by two employees who maintain the record of workers normal or unexpected leaves and their net wages. They can also amend the record, if required. Net pay is calculated by computerized system after adjusting overtime. Wages are paid in cash which is delivered on the wage pay point using secured transport. Two employees from the Wages Department are assigned the duty to make the packet of wages along with final wage sheet. Henceforth, the wage packets are given to the foreman who distributes it among the worker

Requirements:
Find out the shortcomings (weaknesses) in the Wages System of Ahmad & Co. You are required to explain identified shortcomings in context of internal control system along with their remedies? (8+7)

Instructions
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