(i) Audit Work Performed:

Payroll:
Documentation Review: The team reviews employment contracts, payroll records, and policies to
understand the payroll process and identify any deviations or anomalies.
Testing of Controls: Controls surrounding payroll processing, such as password access and
segregation of duties, are tested for effectiveness.
Sample Testing: The team selects a sample of payroll transactions to verify accuracy and
completeness, including wage rates, hours worked, overtime calculations, and deductions.
Analytical Procedures: Analytical procedures are conducted to assess the reasonableness of payroll
expenses relative to the number of employees, industry benchmarks, and historical data.
Confirmation: External confirmation may be obtained from employees regarding their employment
details and compensation.

(ii) Analysis of Strengths and Weaknesses:

Payroll Cycle:
Strengths:
Segregation of duties between Jenny and Atahar reduces the risk of fraudulent activities.
Documentation of employment contracts and payroll policies provides a clear framework for payroll
processing.
Regular backup of payroll data enhances data security and integrity.
Weaknesses:
Lack of independent review of payroll calculations increases the risk of errors or misstatements.
Dependency on Jenny for critical payroll functions poses a single point of failure.
Manual entry of overtime hours from claim sheets increases the risk of transcription errors.
Limited oversight on changes to wage rates and deductions may result in inaccuracies or non-
compliance.
Recommendations:
Implement regular physical inventory counts to enhance accuracy and reliability.
Strengthen controls over payroll processing by implementing independent reviews and segregation of
duties.
Automate overtime tracking and payroll calculations to reduce the risk of errors and improve
efficiency.
Provide additional training to staff involved in payroll processing to ensure compliance with
regulations and company policies.
Enhance documentation and record-keeping practices to facilitate audit trail and oversight.
By addressing these weaknesses and implementing recommended improvements, Traverse can
enhance the reliability and integrity of its inventory and payroll processes, ultimately strengthening its
financial reporting and internal controls.