Each Friday afternoon, payroll checks are distributed by the shift superintendent. The plant is so large and the turnover is so great that the superintendent does not know many of the workers. Undelivered checks are returned to the payroll clerk, from whom the workers can obtain them at some later time. The payroll clerk routinely continues the payroll record for workers one week after their departure from the firm, ultimately cashes the unclaimed checks, and keeps the money. What control could be designed to prevent this misappropriation?
1. Require the CFO’s office to prepare checks only on the basis of supporting documentation from both the timekeeper and payroll office.
2. The payroll should be prepared from the time cards, which are the official records of time worked, and the authorized pay rates and deductions.
3. After the payroll is prepared, it should be independently verified. Also, the payroll department has a recording function and should not be charged with custody of related assets (undelivered paychecks) even temporarily.
4. Undelivered checks should be sent to the CFO for deposit in a bank account after a reasonable period of time