The Human Resources

Management and Payroll Cycle

Chapter 15

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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.
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 Human Resource Management Process

• 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
1. 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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Controls
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
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 4. Disburse Payroll
5. Disburse Payroll Taxes
Threats
1. Theft or fraudulent
distribution of paychecks
2. Failure to make required
payments
3. Untimely payments
4. Inaccurate payments
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Controls
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 15-6
 Reasons to Outsource Payroll

• Reduce costs
▫ Cost of processing and minimize errors
• Broader range of benefits
▫ Administration of benefits
• Free up computer resources

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 Key Terms

• Human resource management • Deduction register

(HRM)/payroll cycle • Earnings statement
• Knowledge management • Payroll clearing account
systems • Flexible benefits plan
• Time card • Payroll service bureau
• Time sheet • Professional employer
• Payroll register organization (PEO)

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