Kudler Fine Foods information on controls that are required.

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The four areas of concern are payroll, accounts payable, accounts receivable, and inventory. We can identify risks in the system, how they would be incorporated into the flowcharts, the internal controls that should be used, an evaluation of the internal control system, and outside controls that can also be used.

In the area of payroll, the main risk will always be a person overriding payroll internal controls. The exact point at which this is an issue and identifiable from the flowchart would be where we check input accuracy. This is the most susceptible point at which data can be changed by the user and is the highest risk area in the entire payroll AIS process. The internal controls that need to be in place include a virtually error-free AIS component. This component needs to be tested on a regular basis to ensure that it is functioning properly. If error-checking is built into the AIS for payroll as it should be, the changes made by users should draw flags when there is an inconsistency.

An additional internal control that can be implemented by use of flowchart design is for only authorized persons to have access to the actual payroll processing function that leads to the printing of the payroll checks and/or authorizations for direct deposit. It is a well known auditing standard that the auditor always, always checks points of access for the printing of checks in the AIS. The minimum number of people should have access - namely only those who actually need such access. The more people that are granted access, the higher risk it becomes. We effectively evaluate the internal controls that we put into place in this area by random evaluation. At various intervals, management conducts an overview of the payroll processing system as it is integrated into the AIS to determine if overrides have taken place. If they have, they need to be dealt with immediately so as to prevent further unauthorized access.

There is always an outside control for large companies and their payroll processes. Most big companies have employees (senior executives, actually) that verify addresses by going to certain addresses that draw flags, based on the information from the AIS. The main reason is ...