Question

Based on the Uber accounting error select one of the following options and discuss how it may have prevented the dilemma associated with the payments to the drivers? Why is this so important?

Option A: Review required deductions for accuracy prior to finalizing payroll.

Option B: Ensure all payroll personnel are properly trained on payment agreement policy for drivers.

Option C: Hire more competent accounting managers.

Answer 1

In 2017, Uber reported that since 2014, Uber has been making an accounting error in which is overcharged the drivers of New York City by closely around 2.6%. Uber has the policy of charging 25% as commission on net pay. In calculating net pay taxes and fees needed to be deducted. However, Uber had been charging commission on gross receipts of the drivers, thus overcharging the drivers. In order to compensate the drivers and regain the confidence of its driver, Uber announced repayment of extra commission amount along with interest amounting to nearly $45 million.

The above mistake could have been easily avoided had the required deductions would have been checked and reviewed by a competent person before finalizing the payroll. The payroll after being prepared should be checked thoroughly and it should be ensured that they are in accordance with agreed terms and conditions.The arithmetical accuracy of calculations also need to be checked.