Chapter 15 The Human Resources Management and Payroll Cycle 15-1
Chapter 15 The Human Resources Management and Payroll Cycle Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-1 Learning Objectives Describe the major business activities and related information processing operations performed in the human resources management (HRM)/payroll cycle. Discuss the key decisions to be made in the HRM/payroll cycle and identify the information needed to make those decisions. Identify the major threats in the HRM/payroll cycle and evaluate the adequacy of various internal control procedures for dealing with them. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-2 HRM and Payroll Cycle Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-3 HRM and Payroll Cycle Managing Employees: Recruiting and hiring new employees Training Job assignment Compensation Performance evaluation Discharge of employees due to voluntary or involuntary termination Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-4 HRM and Payroll Cycle Activities 1. Update master data 2. Validate time and attendance 3. Prepare payroll 4. Distribute payroll 5. Disburse taxes and miscellaneous deductions Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-5 HRM and Payroll General Threats Inaccurate or invalid master data Unauthorized disclosure of sensitive information Loss or destruction of data Hiring unqualified or larcenous employees Violations of employment laws Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-6 HRM and Payroll General Controls Data processing integrity controls Restriction of access to master data Review of all changes to master data Access controls Encryption Backup and disaster recovery procedures Sound hiring procedures, including verification of job applicants’ credentials, skills, references, and employment history Criminal background investigation checks of all applicants for finance-related positions Thorough documentation of hiring, performance evaluation, and dismissal procedures Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-7 Update Master File Threats Unauthorized changes to payroll master data Inaccurate updating of payroll master data Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-8 Update Master File Controls Segregation of duties: HRM department updates master data, but only payroll department issues paychecks Access controls Data processing integrity controls Regular review of all changes to master payroll data Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-9 Validation Threats Inaccurate time and attendance data Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-10 Validation Controls Source data automation for data capture Biometric authentication Segregation of duties (reconciliation of job-time tickets to time cards) Supervisory review Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-11 Prepare Payroll Threats Errors in processing payroll Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-12 Prepare Payroll Controls Data processing integrity controls: batch totals, crossfooting of the payroll register, use of a payroll clearing account, and a zero-balance check Supervisory review of payroll register and other reports Issuing earnings statements to employees Review of IRS guidelines to ensure proper classification of workers as either employees or independent contractors Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-13 Disburse Payroll Threats Theft or fraudulent distribution of paychecks Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-14 Disburse Payroll Controls Restriction of physical access to blank payroll checks and the check signature machine Restriction of access to the EFT system Prenumbering and periodically accounting for all payroll checks and review of all EFT direct deposit transactions Require proper supporting documentation for all paychecks Use of a separate checking account for payroll, maintained as an imprest fund Segregation of duties (cashier versus accounts payable; check distribution from hiring/firing; independent reconciliation of the payroll checking account) Restriction of access to payroll master database Verification of identity of all employees receiving paychecks Re-depositing unclaimed paychecks and investigating cause Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-15 Disburse Taxes and Deduction Threats Failure to make required payments Untimely payments Inaccurate payments Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-16 Disburse Taxes and Deductions Controls Configuration of system to make required payments using current instructions from IRS (Publication Circular E) Processing integrity controls Supervisory review of reports Employee review of earnings statement Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-17
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