F8 SCENARIO QUESTION DISCUSSIONS – Q4 (a), Pilot Paper. Topic: Wages Control System.

This is a discussion relating to Q4 (a), on the Pilot Paper. I am working from the UK paper but both the UK and INT papers are similar. For a link to the international paper, go here:

https://www.accaglobal.com/pubs/students/acca/exams/f8/past_papers/int/f8int_2006_dec_ppq.pdf

Part (a) is the scenario question.

As with all scenarios: Be suspicious of all details – assume they are there for a purpose!

We learn from the first paragraph that Southlea operate a cash wages system.

Because Southlea operates over several construction sites, it will be quite difficult to keep track of the workforce, which is likely to be changing composition and location.

Parts (i) to (vii) talk you through the wages process.

The assumption is each paragraph is relevant to your answer.

Important points:

How is (i) (the clocking in and out system) supervised? What controls are there to prevent one person clocking in before another? And what about the existence of “phantom” employees?

When reading point (ii), we learn that the foreman seems to have a lot of power.

What is to stop him inventing a new employee and collecting wages at the end of the week?

After reading point (iii), we ask: How is the overtime calculated? Is it automatic? What’s to prevent workers working as much overtime as they want? There should be some kind of authorisation there, one that can control costs.

Point (iv) tells us that there are two staff in the wages department. Sure enough, two staff are better than one. But there seems to be no particular supervision of these people. Collusion could be a possibility. They could invent “phantom employees”, or then add random hours to those that are worked, and then split the difference.

When we read point (v), there doesn’t seem to be much there that’s wrong. But… What about the computerised list of payments? It’s from that that the amount of cash to be delivered in point (vi) is deduced.

Now, what evidence is there that the handwritten note in point (vii) agrees with the computer records?

Also, when the wages packets are given out, how do we know who gets what? It’s still very easy for “phantom employees” to be put on the system. Also, cash can be stolen.

TIPS

Approach the question in tabular fashion.

You have to explain the internal control recommendation CLEARLY. The marking scheme only requires four weaknesses and four Internal Control Recommendations.

BUT YOU CAN GO FOR MORE THAN FOUR WEAKNESSES – you can get six, seven, possibly eight.