Question

Internal control problems would be likely to result if a company's payroll department supervisor was also responsible for:

a) reviewing authorization forms for new employees
b) comparing the payroll register with the batch transmittal data
c) authorizing changes in employee pay rates
d) hiring subordinates to work in the payroll department

Answer 1

If the payroll department supervisor authorizes employee pay rates changes, (option c) it can lead to internal control problems due to a conflict of interest and the violation of the segregation of duties principle.

Step-by-step explanation:

Internal control problems would be likely to result if a company's payroll department supervisor was also responsible for authorizing changes in employee pay rates. This scenario presents a conflict of interest and violates the principle of segregation of duties, which is critical for a strong internal control system. This principle requires that no single individual should have control over all aspects of financial transactions to prevent errors and fraud. While reviewing authorization forms for new employees, comparing the payroll register with batch transmittal data, and hiring subordinates are all important tasks within the payroll department, the authorization of pay rate changes should be separated from the direct management of the payroll process to maintain proper internal controls.