Page 96 - Essentials of Payroll: Management and Accounting

Payr oll Pr ocedur es and Contr ols
needed in order to determine where other controls are located in
the process flow.With a knowledge of redundant control points
or evidence that there are no other controls available,you can then
make a rational decision regarding the need for a specific control.

2. Determine the cost of a control point. Having used a flowchart to find
controls that may no longer be needed, you must then determine

their cost. This can be a complex calculation, for it may involve
more than a certain amount of labor, material, or overhead costs
that will be reduced.It is also possible that the control is situated in
the midst of a bottleneck operation, so that its presence is directly
decreasing the capacity of the process, thereby resulting in reduced
profits. In such a situation, the incremental drop in profits must be
added to the incremental cost of operating the control in order to
determine its total cost.

3. Determine the criticality of the control. If a control point is merely
one that supports another control, then taking it away may not

have a significant impact on the ability of the company to retain
control over its assets. However, if its removal can only be coun-
teracted by a number of weaker controls, it may be better to keep
it in operation.

4. Calculate the control’s cost/benefit. The preceding two points can be
compared to determine whether a control point’s cost is outweighed
by its criticality, or if the current mix of controls will allow it to
be eliminated with no significant change in risk, while stopping
the incurrence of its cost.

5. Verify the use of controls targeted for elimination. Even when there
is a clear-cut case for the elimination of a control point, it is use-
ful to notify everyone who is involved with the process in which
it is embedded, in order to ascertain if there is some other use to

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