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13 - Chapter 13 The Human Resources Management and Payroll...

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Unformatted text preview: Chapter 13 The Human Resources Management and Payroll Cycle and Learning Objectives Learning Describe the activities and data processing Describe performed in the HRM/payroll cycle performed Identify threats and corresponding controls Identify key decisions and required Identify information information The AIS and Its Subsystems The FINANCING CYCLE Get Get cash cash Funds Give Give cash cash Funds REVENUE CYCLE Give Give goods goods Get Get cash cash Data Funds Data EXPENDITURE CYCLE Give Give cash cash Data Get Get goods goods General Ledger & Reporting System Data Data Finished goods Labor Raw materials HUMAN RESOURCES CYCLE give give cash cash get get labor labor PRODUCTION CYCLE Give Give F/G F/G Get Get MLO MLO Basic Activities Basic Recruiting and Hiring Recruiting Training Job Assignment Compensation (the primary output) Performance Evaluation Termination Human Resources Context Diagram Human Human Resources Level 0 DFD Human 1.0 Update Payroll Master File 1.0 Changes in payroll information • New hires • Transfers • Terminations • Changes in pay rates • Changes in withholding and deductions Source: Human Resources Department Source: Processing modes • Updates: Online, realtime • Paychecks: Batch Controls • Authorization • Edit checks (e.g., valid employee number ) • Reasonableness checks (e.g., pay rate ) 2.0 Update Tax Rates and Deductions 2.0 Changes in payroll information • Federal, state, and local, income tax withholding amounts • FICA and unemployment insurance • Insurance premiums • 401(k) and other savings deductions • Charitable & miscellaneous (e.g., parking fees, union dues) Source: Payroll Department Source: Processing modes • Updates: Online, realtime • Deductions: Batch (payroll) Controls • Authorization • Edit checks (e.g., valid employee number ) • Reasonableness checks (e.g., compare with previous ) 3.0 Validate Time & Attendance Data 3.0 Hourly • Physical/electronic time cards • Daily start and end times • Total hours per pay period • Time spent on individual tasks Salaried • Monitored by supervisors • Sometimes complete time sheets • Time tracking software used by professional services (attorneys, CPAs, etc.) Commission • Base pay • Performance pay • Bonus • Stock options • Requires links to revenue and other cycles Other issues • Vacation • Sick time • Personal time 4.0 Prepare Payroll 4.0 Time and attendance data Pay rate data from the payroll master file (step 1) Pay Payroll register • Gross pay • Deductions • Net pay • Primary key is: Primary Deductions register • Lists all deductions employee number employee • Primary key is: Primary employee number 5.0 Disburse Payroll 5.0 Payroll • Reviews and approves payroll register • Prepares disbursements voucher to transfer funds from general bank account to Prepares payroll bank account payroll • Prepares checks • Drawn on separate (imprest) bank account specifically for payroll • Should not be drawn on the general bank account Should not • Sends disbursements voucher and payroll register to cashier Cashier • Reviews payroll register and disbursements voucher • Prepares check to transfer funds from general to payroll checking account • Reviews, signs, and distributes checks • Redeposits any unclaimed checks and sends list to internal audit • Sends disbursements voucher to accounting and returns payroll register to Sends Payroll Dept Payroll Accounting updates the general ledger Payroll files the payroll register with time cards, sheets, etc. 6.0 Calculate Benefits & Taxes 6.0 Federal, state, and local income tax withheld (see IRS Federal, Circular E, Employer’s Tax Guide) Employer’s FICA, Medicare Federal and state unemployment insurance Health, disability, and life insurance premiums 401(k) and other retirement contributions Charitable contributions Union and professional membership dues Miscellaneous fees (e.g., parking fees) 7.0 Disburse Payroll Taxes and Deductions 7.0 Process is similar to paychecks But no special separate account is necessary Payroll Processing Alternatives Payroll Direct deposit Advantages • Lower processing costs • More convenient for employees (especially off location; e.g., employees who travel More extensively) extensively) • Reduces or eliminates unclaimed checks Disadvantages • Loss of float (use of funds until checks are cleared) • But more than offset by lower processing costs Payroll service companies Payroll only Payroll + HRM function Reduced costs and wider range of benefits Reduced Especially beneficial for small companies Control Issues Control Hiring unqualified, unethical or criminal employees Maintain position skill requirements records Verify applicants’ skills and references Perform background checks Require vacations, cross train, rotate jobs Employment laws Avoid gender, age, race & religion anti-discrimination law violations Document all recruiting, hiring, promotion and termination activities Maintain continuous training Control Issues cont. Control Unauthorized changes to the payroll master file Segregate duties • Only HR department should update the payroll master file • Payroll master file changes should require at least two levels of Payroll approval approval • Prepare regular payroll master file change reports • HR does not participate in payroll processing or pay distribution Restrict access to the payroll system • Usernames and passwords • Access on a need to know basis Control Issues cont. Control Inaccurate time data Collect with electronic badges, online terminals, bio-technology, etc. Require supervisor authorization Reconcile time clock data to individual job times. Inaccurate payroll processing Calculate batch totals Cross-foot the payroll register Use a payroll clearing account • Debit control account for $ of gross pay, credit withholding accounts • Debit various cost and expense accounts for labor and other costs, credit Debit payroll control account for total payroll • Payroll control account balance should = 0 Control Issues cont. Control Theft or fraudulent distribution of pay to phantom or terminated employees Restrict access to blank checks & check signing machine or direct deposit Restrict programs programs Sequentially number & account for paychecks and direct deposit pay Sequentially distributions distributions Prepare payroll register (journal) & disbursement vouchers to document payroll Separate payroll bank account • Transfer funds from general bank account in the exact amount of the payroll • Balance = 0 when all checks have been cashed Disinterested third party distributes paychecks or direct deposit pay stubs • Return unclaimed checks to the treasury department for prompt redeposit & Return verify legitimacy verify Disinterested third party reconciliation of payroll bank account Control Issues cont. Control Loss, alteration or unauthorized disclosure of data Maintain backup files Enforce physical & logical access controls Encrypt sensitive data Inefficient & ineffective employee performance Monitor performance, especially for off-site employees Training Control Objectives Control All transactions are properly authorized All transactions are valid (occurred) All valid, authorized transactions are recorded All transactions are recorded accurately Assets (cash, inventory, data) are safeguarded from loss/ theft Business activities are performed efficiently/effectively Compliance with regulations END OF CHAPTER 13 END ...
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