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Feb 23, 2014 (3 years and 5 months ago)

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Chapter 15

The Human Resources Management and Payroll Cycle

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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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

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HRM and Payroll Cycle

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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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

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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

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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

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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
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related
positions


Thorough documentation of hiring, performance evaluation, and dismissal
procedures

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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Update Master File Threats


Unauthorized changes to payroll master data


Inaccurate updating of payroll master data

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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

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Validation Threats


Inaccurate time and attendance data

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Validation Controls


Source data automation for data capture


Biometric authentication


Segregation of duties (reconciliation of job
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time tickets to
time cards)


Supervisory review

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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Prepare Payroll Threats


Errors in processing payroll

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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Prepare Payroll Controls


Data processing integrity controls: batch totals, cross
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footing of the payroll register, use of a payroll clearing
account, and a zero
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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

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Disburse Payroll Threats


Theft or fraudulent distribution of paychecks

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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
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depositing unclaimed paychecks and investigating cause

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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Disburse Taxes and Deduction Threats


Failure to make required payments


Untimely payments


Inaccurate payments

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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

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