ACCOUNTING

Accounting Information System

Introduction1

Part 1: Skip-Rope Manufacturing Company2

Part 2: Kowal Manufacturing Company5

Weaknesses in the Internal Control System & Resulting Potential Issues5

Advices for Improvements5

Conclusion6

References8

Accounting Information System

Introduction

In today's highly competitive and rapidly advancing business world, every company is required to develop, manage, and control its costs and expenses. In order to do so, companies needs to develop and implement appropriate check and balances in different areas. One of the most important areas that can result in various problems for the business is company's payroll department. The potential threats of problems that can arise by payrolls system should be addressed in order to ensure that staffs is paid properly, on timely basis as well; contractual obligations are paid, as well as the withholding duties and tax are upheld. Thus, the payroll systems of the business hold an immense importance, and thereby companies are required to develop and maintain effective internal control system for their payroll processes.

According to James A. Hall (2011, p.108), the Internal control System involves practices, procedures, as well as policies adopted and implemented by the business in order to accomplish four major objectives:

For ensuring the reliability as well as the accuracy of accounting information and records.

For safeguarding the assets of the business (Hall, 2011, p.108).

For promoting the efficiency in the operations of the company.

For measuring compliance with the prescribed procedures as well as policies of the firm's management (Hall, 2011, p.108).

Thus, efficient internal control system of payroll processes can lead the firm towards the assurance of cost effectiveness and control. Thereby, it is important for the firm to ensure proper internal control system of their payrolls that must include aspects like only valid alterations are processed via payroll system, distributions must be monitored such as offering workers the ability to have their payrolls directly in their personal bank accounts through electronic funds transfer, proper recording of payrolls with respect to factual and true number of employees, and several others (Bailey & Gaulin, 2001, p.12). Hence, all the companies must involve an appropriate internal control system for their payroll processes. In order to further understand this point, this paper undertakes a case study of two firms, i.e. Skip-Rope Manufacturing Company and Kowal Manufacturing Company, to identify the weaknesses in payroll procedures and its resulting threats and issues. Further, the report also suggests certain ways for enhancing the internal control over hiring and payroll processes. Thus, this would result in better understanding of the significant weaknesses of internal control system of payrolls that must be avoided and the ways to develop a strong payroll system within the business.

Part 1: Skip-Rope Manufacturing Company

Questions

Yes / No

Potential Problem In Absence of Control

Does company have authorized the discretionary payroll withholdings as well as deductions in writing by workers?

Penalties in case tax code is violated, additionally, it can also results in errors and lawsuits by the workers

Does the company appropriately authorizes and approves the payroll changes such as overtime, bonuses, salary increment, hires, promotions, separations, etc?

Fictitious workers and unauthorized pay raise

Does the company promptly input any ...