Pertemuan 5 – 7
Case Study : WEDCO
Project 1 : Review of General Controls
CIS DEPARTMENT BI-WEEKLY
PAYROLL PROCESSING
Processing of payroll and updating of the payroll master file is handled by the CIS
department at Wedco. The complete payroll system within Wedco is illustrated in Figure
B-1. As this diagram shows, the biweekly payroll processing is executed in two phases :
off week processing and pay-week processing.
OFF WEEK PAYROLL PROCESSING
Off week payroll processing consists of maintaining employee master file and generating
time cards and payroll transmittals for the next payroll period.
Updating Employee Master File
The payroll department initiates master file maintenance transactions themselves or in
response to requests made by employee supervisors on the form entitled Notice for
Payroll Action. In each case, the payroll department sends altered or new employee
master file input records to the CIS department. Key entry clerks in the CIS department
capture the data for processing.
Off week processing programs edit and process the master file changes the master file
changes and print updated employee master file records for distribution to the payroll
department.
Typical payroll changes that affect the master file include terminations, new hires, wage
rate changes, reclassification, and permanent transfers.
Generating Payroll Transmittals and Time Cards
At the close of each payroll period, off week payroll processing programs generate the
payroll transmittals and time cards to be used during the next pay period. These
transmittals and time cards to be used during the next pay period. These transmittals and
time cards are generated from the payroll department master file.
One payroll transmittal is generated, in triplicate, for each department. Each payroll
transmittal lists all employees in the department, their payroll numbers, job titles, and the
payroll ending date. These are columns on the payroll transmittal form for the employee
supervisor to enter the number of regular hours worked, number of overtime hours
worked, and comments concerning changes in employee job status during the week (such
as terminated, new hire/manual time card, leave of absence, etc). Additional space is
provided for payroll departmental review and entry of batch control totals on each
transmittal.
A single time card is generated for each employee listed on a payroll transmittal. In
addition to employee name and number, each time card has entries for :
o Regular and overtime (time in and out) for each of the 14 days in a payroll period
o Number of regular and overtime hours worked each day
o Total hours worked during the payroll period
o Shift worked each day
o Classification of hours not worked during the period (sick leave, vacation, holiday,
jury duty, other)
o Comments column for pertinent remarks
These also are spaces for employee and supervisor signatures. The time cards, listed in
employee number order on each payroll transmittal, are sent with the payroll transmittals
to the payroll department. From there, the time cards are distributed to the corresponding
departments.
PAY WEEK PROCESSING
Each employee supervisor is responsible for sending the transmittal and associated time
cards to the payroll department at the end of each pay period. The payroll department
checks and logs the transmittals and time cards, then forwards them to the CIS
department. Each payroll transmittal sheet is wrapped around the batch of time cards that
are listed on it. Written on the payroll transmittal sheet are the batch control totals
(number of cards, number of regular and overtime hours, etc).
For each batch of time cards and its payroll transmittal, employee payroll number and
hours worked data are captured for processing, along with the appropriate batch control
totals. The payroll transmittals, associated time cards, and an edit listing of the keyed data
are sent to the payroll department for batch control total verification.
In addition to generating payroll checks, the application program generates several
payroll and management reports, all of which are forwarded to the payroll department.
These reports include:
Checks Register
The check register is a list of all current period payroll checks in check number order.
The check register is forwarded to the payroll department.
Payroll Register
The payroll register is a list, in Social Security number order, of all detailed payroll check
items for the current pay period. These items include gross pay, net pay, FICA, SDI and
other deductions.
Payroll Distribution Summary
The payroll distribution summary is an account distribution, in account number order, for
current period payroll expenses. These expenses include salary administration, clerical
work, maintenance expenses, etc.
Payroll Deduction Summary
The payroll deduction summary is the current pay period listing of all employee
voluntary and mandatory deductions. The listing is organized first by receiving
organization and then by employee Social Security number.
Payroll Master file
The payroll master file provides a summary of employee data, current period earnings,
and year to date earnings. The master file lists employees in payroll number order and
includes such data as name, address, social security number, starting date, classification,
salary grade, department, location, current and year to date payroll information, etc.
A list of the subprograms within the payroll processing system is presented in Figure B-2,
along with description of these programs.
CASE ASSIGNMENT
Based on the information given, what general controls can you identify within this
system? Explain the importance of these controls. Are there any major weaknesses within
this systems? If so, what control measures would your recommend to correct these
weaknesses?
Figure B-1
CIS Department
Employee
Time Card
Employee Supervisor
Controller Departement
Payroll Department
Payroll
Transmittals
Prepared from
Master File
Time Card
Payroll
Transmittal
Payroll Checks
For Signing and
Stuffing
Paryroll Checks
Manual
Checks
Check Register
Time Cards
Prepared from
Master File
Time Card
Payroll
Transmittal
Corrected and
Updated
Payroll Register
Time Card
Payroll
Transmittal
(From all Depts)
Time Card
Employee change and
control totals to controllers
Payroll
Transmittals
Key Punched
Time Card
Data and
Control Totals
Payroll
Deduction
Summary
Payroll
Distribution
Summary
Time Card
Payroll
Transmittals
Payroll Edit
Listing
Payroll Edit
Listing
Master File
Manual Check and
Exception Report to
Controller
Pay Week Processing
Off Week Processing
Notice for
Payroll Action
(To change
Master File)
Notice for
Payroll Action
Payroll
Departement
Master File
Employee fills out and
signs time cards
Reviews and corrects payroll
transmittal. Lines off terminated
employee(s) and writes
termination time card(s). adds
new hires or transferred
transmittal and issues new
manual time cards.
Review and signs approval of
time cards
Initiates changes to master files
for new hires, terminations,
permanent transfer, salary
changes, qualifications.
Distributes payroll transmittal and
time cards by location and
department.
Altered or New
Master File
Record
Key Purncehd
Corrections or
additions
Updated
Employee
Master File
Record
Control clerk logs in transmittals and checks
input/output control totals for the time cards
Oversees check printing machine. Agree number of checks with
payroll dept. control totals.
Resolves exceptions generated by payroll dept.
Receives all transmittals and time
cards and computes, saves and
sends to controller, control totals for
payroll (number of cards, regular
hours, overtime hours)
Reviews CIS payroll edit listing and
reports exceptions to controller
department. When necessary, can
issue manual checks to controller.
Sends master file updates to data
processing dept. verifies master file
update and inserts updates employee
record in dept. master file for
reference.
Reviews processing of new hires and terminations.
Figure B-2
USER ORGANIZATION : PAYROLL DEPARTMENT
Name of Application :Bi-Weekly Payroll Processing
Topic : Subprogram Descriptions (Pay-Week Processing)
PR 01 Edit and store payroll-run control data, and branch to appropriate program
PR 10 Edit time card input data for valid field entries and for batch-control total correctness, and print edit listing.
PR 20 Sort payroll-card input data by employee payroll number.
PR 40 Retrieve current employee data from payroll master file and store current-payroll-period file to be used as a working file
(such as employee name, number, classification, Social Security number, department, location, wage rate, etc. ). Using
these data:
o Compute gross pay using time-card hours and master-file regular and overtime pay rates
o Computer mandatory payroll deductions including FICA, SDI, FUI, SUI.
o Compute voluntary payroll deductions including pension, credit union, savings bonds and health insurance
o Compute current payroll distributions to expense accounts by referencing employee classifications with corresponding
expense account code classifications.
o Print unmatched employee records.
PR 50 Update master file with all current-payroll-period computations. Write current-payroll-period data and computation results
To a current-payroll-period file for further processing
PR 60 Sort current-payroll-period file data by employee location and write to work file
PR 70 Sort data from current-payroll-period file by organization receiving payroll deductions and then by employee Social Security
number
PR 80 Sort data from current-payroll-period file by organization receiving payroll deductions and then by employee Social Security
number, and write to work file
PR 90 Sort current-payroll-period file by account distribution sequence; rearrange data in payroll-distribution summary format; write
to work file
PR 100 Print sequentially numbered checks, check register, payroll register, payroll deduction summary, payroll distribution
summary, and updated master file.
Topic : Subprogram Descriptions (Off-Week Processing)
PR 01 Edit and store run-control cards and branch to appropriate program
PR 210 Access master file and sort employee time-card data (by location) into payroll transmittal formats. Print time cards.
PR 300 Edit update inputs to master file. Also, generate master –file records for new hires; transfer master file content for terminated
employees to current-year-terminations file for year end processing, and alter master file content in accordance with update
data for wage change, reclassification, address change, vacation, leave of absence, etc. also print new or updated master file
content for each altered employee master file.