Control objectives, principal controls, and attendant tests of controls in relation to the calculation and payment of salaries and wages in Prima Limited.

Control objectives:

i. To ensure that employees are only paid for work done;

ii. To ensure that rates of pay are correctly applied;

iii. To ensure that gross pay and net pay are correctly calculated;

iv. To ensure that deductions are correctly calculated and paid over to the appropriate third party;

v. To ensure all transactions are authorised; and

vi. To ensure that salaries and wages transactions are properly recorded in the accounting records.

Principal controls:

i. Segregation of duties between HR and payroll functions;

ii. Maintenance of personnel files and rate of pay list by the HR department;

iii. Calculations checked by payroll supervisor;

iv. Approval of net pay figures for each employee by finance director;

v. Comparison of current period payroll total to budget and prior period and investigation of changes;

vi. Payment of salaries and wages by bank transfer;

vii. Arithmetical check of calculations;

viii. Restriction of access to payroll software by passwords; and

ix. Immediate removal of leavers from the payroll.

Tests of controls:

i. Observe and evaluate proper segregation of duties;

ii. Review policies and procedures in HR department and observe their use in practice;

iii. Review and test authorisation procedures in HR department;

iv. Agree rates of pay and deductions for a sample of employees;

v. Reperform calculations for a sample of workers;

vi. Observe the payment of wages and salaries to confirm identity checks are being made;

vii. Review and test procedures for entering and leaving the entity;

viii. Review and test security measures in payroll department;

ix. Review and test procedures for authorising and approving overtime;

x. Examine evidence of placing reliance on internal audit work; and

xi. Examine evidence of review of payroll by an independent person.