Fox Industries Ltd (Fox) manufactures children’s building block…

Question Answered step-by-step Fox Industries Ltd (Fox) manufactures children’s building block… Fox Industries Ltd (Fox) manufactures children’s building block toys and have been trading for over 40 years selling to a variety of large and small toy retailers across the country. The company manufactures 24 hours a day, seven days a week on a three shift system. Fox has a workforce of 360 hourly paid employees, who operate the block manufacturing and packing machines. There are six shift supervisors who are also hourly paid. In addition, Fox employs 100 salaried employees who work in the marketing, sales, HR and administration departments. With the exception of the shift supervisors, Fox’s hourly paid employees clock in and out of the factory using an employee swipe card. Employees are paid on an hourly basis for each hour worked and the money is paid by cash, weekly. There is no monitoring of the clocking in and out process. The employee swipes their card through a monitoring machine which identifies the employee number and links the total number of hours swiped to the hours worked report. At the end of every week, the monitoring machine automatically closes the week off and uploads the hours worked report to the payroll system. This is accessed, like the rest of the payroll system by a password. Only two people have access to the password; Hanna and Abdul the purchase ledger clerk. Abdul covers for Hanna when she is absent due to sickness or annual leave. For each employee, the hours worked report allocates total swiped hours between standard and overtime categories. Hanna prints out the hours worked report and reviews it for any obvious errors. If she spots a problem, she overrides the error and adjusts the relevant figure directly in the payroll system.The payroll system calculates, on a weekly basis, the cash wages to be paid to the hourly paid employees. Using the hours worked report it identifies the standard hourly multiplies the hourly wage rate by number of hours worked by each employee and generates the gross pay, net pay and appropriate tax and pension deductions. These calculations are not checked by anyone as they are performed by the payroll system. An annual hourly wage increase is given to the employees and the Human Resources (HR) department notifies the payroll department by email. No review of the change to the payroll master file is performed.Every Thursday a security company delivers money to Hanna plus any spare office-based employee who can help prepare the pay packets from the money. On a Friday, day shift factory employees collect their pay packets from the receptionist who sits just outside the payroll office. The pay packets for night shift workers are left in the payroll office for the night shift supervisors who collect them, using their spare key to access the office. The night shift supervisors physically distribute them to the workforce. If any employees are absent then either the receptionist (day shift) or the factory supervisor (night shift) keeps these wages and gives them to the employee on their return to work.All salaried employees are paid by direct transfer into their bank accounts. All calculations are performed using the payroll system. Overtime is sometimes available for the salaried staff. Before Hanna enters the overtime for the salaried staff she requires written authority from the Financial Accountant. In addition, if any new staff are recruited, the Financial Accountant authorises Hanna by email to add them to the payroll system. You are employed by IPD & Co, who are Fox’s external auditors. Your team has just finished its audit of Fox and the engagement partner has requested you present the results of your work to date on the following areas:Required:i         Identify the objectives of exercising internal controls in a payroll system and discuss the extent to which the procedures exercised by Fox achieve these objectives; outlining both the strengths and weaknesses.ii        Describe the procedures which would strengthen Fox’s payroll system.Iii       Evaluate the procedures you used to obtain evidence during your audit of Fox, as prescribed by the relevant accounting standards; including analytical review, reconciliation, inquiry, inspection, observation and recalculation. Accounting Business Financial Accounting AUDITING F8 Share QuestionEmailCopy link Comments (0)