Yvonne Reina P.

Totesora

Assignment #1 Problem 8

April 24, 2014

a.

Prepare a systems flowchart of the procedures described here. Worker/Employee Time Card Supervisor Time Card
Matt Demko authorizes and signs time cards.

Payroll Department Time Card

Prepare Paychecks

Paycheck

Paycheck

Paycheck

Matt Demko distributes paychecks to the employees.

b.

Identify any control problems in the system.

This system does not have a proper physical control activity particularly in its segregation of duties. Matt Demko authorizes payroll payments by signing time cards, submits the signed time cards to the payroll department and distributes the paychecks to the workers. This activity violates the objective of separating the authorization for a transaction from the processing of the transaction. c. What sorts of fraud are possible in this system? Payroll fraud for nonexistent employees This is the distribution of fraudulent paychecks to existent and/or nonexistent employees. Matt Demko can submit time cards for nonexistent employees and he can then claim and cash the paycheck allotted for this employee. Bribery/Kickback Fraud This involves giving, offering, soliciting, or receiving things of value to influence an official in the performance of his or her lawful duties. Matt Demko can authorize illegal increases on an employees salary and gain from it by conspiring with the employee in order to receive a part of the excessive pay given to the employee.