Chapter 7:Improving control procedures
The purpose of payroll system is to compute the gross wages and salaries of
employees and produce payslips,cheques and/or listings sent to banks instructing
them to make payments.Key controls over payroll system cover setting of wages
and salaries(employees are only paid for work that they have done),recording of
wages and salaries(wages and salaries are correctly calculated and
recorded),payment of wages and salaries(the correct employees are paid) and
deductions from pay(deductions have been calculated correctly and are
Controls on purchases cycle will be based around buying(authorisation),goods
inwards(checks) and accounting(recording).
Controls on sales cycle will be based around selling(authorisation),goods
outwards(checks) and accounting(recording).
The control of cash is of prime importance in any business.Key objectives for the
control of cash are to ensure that all sums are received and subsequently
accounted for,no payments are made which should not be made,all receipts and
payments are promptly and accurately recorded and as part of working capital
management.Cash and petty cash must be regularly reconciled.Every payment
must be approved by an authorised person.A bank reconciliation should be done
at least once a month.
Control is enhanced by an integrated accounting system.An integrated system
automatically links together the different elements of an accounting package,
such as sales, purchases and stock.There are a number of potential benefits to
(i) One entry updates all of the others so there are fewer data inputs and fewer
(ii) Fewer people need to be involved in the input. This makes it possible to have
more restricted access to the computer system, which enhances overall control.
(iii) Errors in one module are unlikely to go unnoticed because they will impinge
upon other areas.
(iv) Frauds involving just one accounting area are difficult to maintain because
queries will tend to arise in other areas. Chapter 8:Management information and reporting system
Good management information is ACCURATE:
Easy to use
Three main functions of management where management information can be
useful are as follows:
(i) Planning: management needs to decide what the objectives of the company
are and how they can be achieved.Management information is used to help
management to plan the resources that a business will require and how they will
(ii) Control: once