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Chapter 15 The Human Resources Management and Payroll Cycle Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-1.

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Presentation on theme: "Chapter 15 The Human Resources Management and Payroll Cycle Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-1."— Presentation transcript:

1 Chapter 15 The Human Resources Management and Payroll Cycle Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-1

2 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

3 HRM and Payroll Cycle Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-3

4 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

5 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

6 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

7 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

8 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

9 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

10 Validation Threats  Inaccurate time and attendance data Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-10

11 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

12 Prepare Payroll Threats  Errors in processing payroll Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-12

13 Prepare Payroll Controls  Data processing integrity controls: batch totals, cross- footing 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

14 Disburse Payroll Threats  Theft or fraudulent distribution of paychecks Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 15-14

15 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

16 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

17 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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