Question
12. Timing of pay distributed
Weakness:
Because foremen may handle funds inconsistently, relying on them to disburse pay creates a vacuum in responsibility.
Recommendation:
It is advised that employees who are unrelated to the payroll computation be trained and assigned to conduct pay distribution in a secure manner. This lowers the possibility of fraud and establishes a separation of roles.
Please include auditing jargons and IAS's
Weakness:
Because foremen may handle funds inconsistently, relying on them to disburse pay creates a vacuum in responsibility.
Recommendation:
It is advised that employees who are unrelated to the payroll computation be trained and assigned to conduct pay distribution in a secure manner. This lowers the possibility of fraud and establishes a separation of roles.
Please include auditing jargons and IAS's
Answers
GPT-4o mini
### Weakness:
The inconsistency in fund management by foremen presents a significant control deficiency, as the delegation of pay disbursement to a single group without appropriate oversight creates an inherent risk of misappropriation and fraud. This vacuum in accountability contravenes fundamental principles of internal controls, leading to potential material misstatements in financial reporting.
### Recommendation:
To mitigate the risk of fraud and enhance accountability in pay distribution, it is imperative to implement a system of segregation of duties (SoD) as outlined in International Auditing Standards (IAS 240). Specifically, employees who are independent of the payroll computation process should be duly trained and tasked with executing pay disbursement in a secure and controlled environment. This measure aligns with IAS 315 regarding understanding the entity and its environment, which emphasizes the necessity for robust internal controls.
Moreover, regular audits should be instituted as per IAS 330 to assess the effectiveness of the new pay distribution process, ensuring that appropriate checks and balances are maintained. Conducting surprise audits and monitoring procedures will further enhance the integrity of financial controls, ensuring that any anomalies are promptly identified and rectified. Such proactive measures will fortify the organization's governance framework, ultimately enhancing stakeholder confidence in financial reporting.
The inconsistency in fund management by foremen presents a significant control deficiency, as the delegation of pay disbursement to a single group without appropriate oversight creates an inherent risk of misappropriation and fraud. This vacuum in accountability contravenes fundamental principles of internal controls, leading to potential material misstatements in financial reporting.
### Recommendation:
To mitigate the risk of fraud and enhance accountability in pay distribution, it is imperative to implement a system of segregation of duties (SoD) as outlined in International Auditing Standards (IAS 240). Specifically, employees who are independent of the payroll computation process should be duly trained and tasked with executing pay disbursement in a secure and controlled environment. This measure aligns with IAS 315 regarding understanding the entity and its environment, which emphasizes the necessity for robust internal controls.
Moreover, regular audits should be instituted as per IAS 330 to assess the effectiveness of the new pay distribution process, ensuring that appropriate checks and balances are maintained. Conducting surprise audits and monitoring procedures will further enhance the integrity of financial controls, ensuring that any anomalies are promptly identified and rectified. Such proactive measures will fortify the organization's governance framework, ultimately enhancing stakeholder confidence in financial reporting.