Chap012 - Chapter 12 - Auditing the Human Resource...

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Chapter 12 - Auditing the Human Resource Management Process CHAPTER 12 AUDITING THE HUMAN RESOURCE MANAGEMENT PROCESS Answers to Review Questions 12-1 Most entities either computerize their payroll systems or use an outside service bureau because of the large volume and routine nature of payroll transactions. 12-2 There are two major types of transactions that are processed through the human resource management process: (1) payments to employees for services rendered and (2) accrual and payment of payroll-related liabilities arising from employees' services. The financial statements accounts that are generally affected by the two types of payroll-related transactions are: Payroll transaction: Cash Inventory Direct and indirect labor expense Various payroll-related liability and expense accounts Accrued payroll liability transactions: Cash Various accruals (e.g., payroll taxes, and pension costs) 12-3 The payroll register, which is also referred to as the payroll journal, is a summary of all payroll checks issued to employees. The payroll master file is the computer file that maintains all the entity's records related to payroll, including information on each employee such as name, Social Security number, pay rate, and authorized deductions. The payroll master file changes report contains a record of the changes made to the payroll master file. 12.4 The following duties are performed in the human resources, timekeeping, and payroll-processing functions: Human Resources: Authorization of hiring, firing, wage rates and salary adjustments, salaries, and payroll deductions. Timekeeping: Processing of employees' attendance and time information and coding of account distribution. Payroll processing: Computation of gross pay, deductions, and net pay; recording and summarizing of payments; and verification of account distribution. 12-1
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Chapter 12 - Auditing the Human Resource Management Process 12-5 The following table contains the key segregation of duties in the human resource management process and possible errors and fraud that can occur if such segregation of duties is not present. Segregation of Duties Possible Errors or Fraud as a Result of Conflicts in Duties The supervision function should be segregated from the personnel records and payroll-processing functions. Unauthorized payments to existing employees or payments to fictitious employees. The disbursement function should be segregated from the personnel records, supervision, and payroll-processing functions. Unauthorized payroll checks may be issued. The payroll-processing function should be segregated from the general ledger function. Concealment of a defalcation that would normally be detected by independent review of accounting entries made to the general ledger.
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Chap012 - Chapter 12 - Auditing the Human Resource...

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