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The Human Resources
Management and Payroll Cycle
Chapter 15
Copyright © 2015 Pearson Education, Inc.
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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 © 2015 Pearson Education, Inc.
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Human Resource Management Process
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Recruit and hire new employees
Training
Job assignment
Compensation (payroll)
Performance evaluation
Discharge of employees (voluntary or
involuntary)
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Payroll Cycle Activities
• Update payroll master data
• Validate time and attendance data
▫ Source document: time sheets
• Prepare payroll
▫ Payroll register and deduction register
• Disburse payroll
• Disburse taxes and miscellaneous deductions
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1. Update Master Payroll Data
2. Validate Time and Attendance Data
3. Prepare Payroll
Threats
Controls
1.
1 a. Access controls and
segregation of duties
2 a. Data processing integrity
controls
3 a. Supervisory review
b. Source data automation for
data capture
4 a. Data processing integrity
controls
b. Supervisory review
Unauthorized changes to
payroll master data
2. Inaccurate updating of
master data
3. Inaccurate time and
attendance data
4. Errors in processing payroll
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4. Disburse Payroll
5. Disburse Payroll Taxes
Threats
Controls
1.
1 a. Restrict access to blank
payroll checks and check
signing machine
b. Use separate account
(imprest fund)
2 a. Configure system to make
automatic payments on time
3 a. Configure system to make
automatic payments on time
4 a. Process integrity controls
b. Supervisory review
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Theft or fraudulent
distribution of paychecks
2. Failure to make required
payments
3. Untimely payments
4. Inaccurate payments
Copyright © 2015 Pearson Education, Inc.
Reasons to Outsource Payroll
• Reduce costs
▫ Cost of processing and minimize errors
• Broader range of benefits
▫ Administration of benefits
• Free up computer resources
Copyright © 2015 Pearson Education, Inc.
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Key Terms
• Human resource management
(HRM)/payroll cycle
• Knowledge management
systems
• Time card
• Time sheet
• Payroll register
Copyright © 2015 Pearson Education, Inc.
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Deduction register
Earnings statement
Payroll clearing account
Flexible benefits plan
Payroll service bureau
Professional employer
organization (PEO)
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