PROBLEM H-4B
(a)
Weaknesses
(b)
Recommended Procedures
1.
Department managers
have too much authority in
hiring.
The human resources
department should do
the hiring.
An interview should not
be the sole basis for
hiring or rejecting an
applicant.
The qualifications of each
applicant should be
determined and letters of
recommendation should be
obtained.
The pay rate should not
be manually written on
the W-4 form.
The human resources
department should notify
the payroll department of
new hires through a hiring
authorization form.
2.
The chief accountant
manually signs the payroll
checks.
The treasurer should sign
the payroll checks.
The department managers
distribute the payroll
checks.
A representative of the
treasurer’s department
should distribute the payroll
checks.
The department managers
retain custody of
unclaimed checks.
A representative of the
treasurer’s department
should have custody of
unclaimed checks.
PROBLEM H-4B (Continued)
(a)
Weaknesses
(b)
Recommended Procedures
3.
The assignment of duties
among the payroll clerks
does not result in any
independent internal
verification.
The duties of the payroll
clerks should be assigned
so that one clerk computes
gross earnings for all
employees. Then the
computations made should
be verified by the clerk that
did not make the initial
determination of the data.
Each month the duties of
the clerks should be
reversed.
BYP H-1 EXPLORING THE WEB
(a) A worker who performs services for you is your employee if you can
control what will be done and how it will be done. This is so even when
Generally, people in business for themselves are not employees. For
(b) Payments for the services of a child under the age of 18 who works for
his or her parent in a trade or business (sole proprietorship or a partner-
(c) Any employee without a social security card can get one by completing
Form SS-5, Application for a Social Security Card.
(d) Tips that your employee receives are generally subject to withholding.
Your employee must report cash tips to you by the 10th of the month
BYP H-2 DECISION MAKING ACROSS THE ORGANIZATION
(a) BENSEN SERVICES INC.
Month
Number of
Employees
Days
Worked
Daily
Rate
Cost
January-March
April-May
June-October
November-December
Total Cost
2
3
2
3
60 (20 X 3)
50 (25 X 2)
90 (18 X 5)
46 (23 X 2)
$96
96
96
96
$11,520
14,400
17,280
13,248
$56,448
PERMANENT EMPLOYEES
Salaries ($28,000 X 2) ………………………………………. $56,000
Additional payroll costs
FICA taxes (7.65% X $56,000) …………………….. $4,284
as shown, by discharging the two employees and accepting the
Bensen Services Inc. plan.
(b) Ann should consider the following additional factors:
1. The effect on the morale of the continuing employees if two
BYP H-2 (Continued)
3. The effect on management control and supervision of using
Bensen Services Inc. personnel.
4. The time that may be required to indoctrinate the different Bensen
BYP H-3 COMMUNICATION ACTIVITY
Dear Mr. Merando:
payroll taxes.
The taxes that are involved in determining the payroll are as follows:
1. FICA taxes. These taxes were enacted by Congress to provide workers
with supplemental retirement, employment disability, and medical
then remitted to the government. These taxes are not an expense to
the employer.
2. Federal income taxes. Employers are required to withhold federal
withheld are remitted by the employer to the government. These taxes
are not an expense to the employer.
3. State and city income taxes. Where applicable, these income taxes are
similar to federal income taxes.
There are three types of payroll taxes that are levied on employers that are
recognized as payroll tax expense by the employer.
1. FICA taxes. The employer must match each employee’s FICA contri–
2. Federal unemployment taxes. These taxes provide benefits to employees
who lose their jobs through no fault of their own. The tax is 6.2% on
BYP H-3 (Continued)
3. State unemployment taxes. These taxes also provide benefits to em-
ployees who lose their jobs. The basic rate is usually 5.4% on the first
Very truly yours,
BYP H-4 ETHICS CASE
(a) The stakeholders in this situation are:
Danny Pedigo, owner and manager.
Sixteen part-time employees of Danny’s.
Shelly Eby, public accountant.
(c) Shelly Eby, as Danny’s public accountant, should not be an accomplice
to improper payroll deductions and accounting. Shelly should constantly
(d) An important internal control principle is to make no payments from
cash receipts. All cash receipts should be deposited daily intact in the