ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions
A manufacturing company's payroll department has calculated the monthly wages for all employees. Before the payments are made, the finance function needs to ensure that only genuine employees are paid. Which of the following controls, involving the human resources (HR) function, would BEST reduce the risk of payments to fictitious employees?
Comparing the payroll list with HR's record of current employees, including starters and leavers, best reduces the risk of paying fictitious employees. HR holds the authoritative workforce data, so segregating this from payroll processing exposes ghost employees, whereas budget reviews and timesheets do not confirm that employees genuinely exist.
- APayroll staff compare the payroll list with an HR record of current employees, including starters and leaversCorrect
- BThe finance director reviews the total payroll cost against the annual budget each month
- CEmployees are asked to sign a timesheet to confirm the hours they have worked
Explanation
Fictitious (ghost) employees arise when payroll is not matched to the true workforce. HR holds the authoritative records of starters and leavers, so reconciling the payroll list to HR records directly tackles this risk. Budget review is a high-level check that may not detect small fraudulent payments, and timesheets only support hours worked by existing staff, not whether the person exists.
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