ACCA · Question 17 · Internal Control

SECTION B - QUESTION 2 (20 MARKS)

GlobalFreight Logistics is a multinational shipping company. You are the audit senior evaluating the internal controls for the year ended 30 June 20X6.

During your walkthrough of the payroll and revenue systems, you documented the following:

1. Payroll: GlobalFreight employs hundreds of dock workers who are paid hourly. Workers fill out paper timesheets at the end of each week. These are handed to the shift supervisor, who signs them and leaves them in a tray for the payroll clerk. The payroll clerk manually enters the hours into the payroll system. There is no secondary check of the data entry.

2. Overtime: Due to shipping delays, overtime is frequent. Workers can claim overtime by simply writing the extra hours on their timesheet. The shift supervisor signs the timesheet but does not cross-reference the overtime claimed to the actual ship docking schedules.

3. Starters and Leavers: When a worker leaves, the HR department emails the payroll clerk to remove them from the system. However, during busy periods, HR sometimes forgets to send the email for several weeks.

4. Revenue Invoicing: GlobalFreight has complex international tariffs. Sales clerks manually calculate the shipping cost for each client based on a printed tariff book from 20X4. The invoice is then typed into Word and mailed to the client.

5. Credit Control: New clients are granted a standard $50,000 credit limit by the sales clerk to speed up the onboarding process. The credit control department only reviews the client's creditworthiness if they exceed this $50,000 limit.

Requirements:
Identify and explain FIVE internal control deficiencies from the scenario. For each deficiency, provide a recommendation to address it, and describe a test of control the auditor should perform to assess if the recommendation is operating effectively. (20 marks)