Chapter 17

The payroll system must be designed to collect and integrate cost data with other types of HR information to enable management to make the following kinds of decisions:

Future workforce staffing needs Employee performance Employee morale Payroll processing efficiency and effectiveness

Employers often contribute some or all of the amounts to pay for their employee's _____, disability, and ___ insurance.

Health Life

A Gallup survey found that an employee's attitude affects profitability. The survey found that there are four key attitudes

1. Employees believe they have the opportunity to do what they do best. 2. They believe their opinions count. 3. They think that coworkers are committed to quality. 4. They understand the connection between their jobs and the company's mission

The more important tasks of HRM/payroll cycle information systems include:

1. Recruiting and hiring new employees 2. Training 3. Job assignment 4. Compensation (payroll) 5. Performance evaluation 6. Discharge of employees due to voluntary or involuntary termination

Employees who earn a fixed salary seldom record their ___ ___ on a time card. Instead, their supervisors monitor their presence on the job.

Labor efforts

What are controls for violation of employment laws?

The best control procedure is careful documentation of all actions relating to advertising, recruiting, and hiring new employees and dismissal of employees.Continuing education on changes in employment laws provides organizations with knowledge of upcoming changes and how to handle them from a process and systems perspective

What are the procedures for preparing payroll?

The payroll transaction file is sorted by employee number. The sorted time-data file is then used to prepare employee paychecks. Next, all payroll deductions are summed and the total is subtracted from gross pay to obtain net pay. Once net pay is obtained, the year-to-date fields for gross pay, deductions, and net pay in the payroll master file are updated. Finally, the payroll register and employee paychecks are printed.

What are questions for payroll processing efficiency and effectiveness?

What is the overall level of employee morale and job satisfaction? How can the compensation scheme be used to improve morale, satisfaction, and performance? What additional fringe benefits, if any, should be offered?

What are the questions for employee morale?

What is the overall level of employee morale and job satisfaction? How can the compensation scheme be used to improve morale, satisfaction, and performance? What additional fringe benefits, if any, should be offered?

What are the questions for employee performance?

Which employees should be promoted or receive pay raises? Who should be discharged? Is overall performance improving or declining? Is turnover excessive? Is tardiness or absenteeism a problem?

What are controls for theft or fraudulent distribution of paychecks?

Access to blank payroll checks and to the check signature machine should be restricted. All payroll checks should be sequentially prenumbered and periodically accounted for. The cashier should sign all payroll checks only when supported by proper documentation (the payroll register and disbursement voucher). Someone independent of the payroll process should reconcile the payroll bank account.

What are controls for inaccurate time and attendance data?

Automating source data to capture hours worked can prevent errors. Segregation of duties and reconciliation of job-time tickets to the time cards. Supervisory review can catch errors.

What are controls for inaccurate updating of payroll master data?

Automation can reduce the risk of unintentional inaccuracies. The data entry program should include the following data processing integrity controls: Field checks, limit checks, a validity check of the employee number Proper segregation of duties can reduce the risk of intentional accuracies. Time clock data, used for calculating payroll, also should be reconciled to the job time ticket data.

__ ___ provides savings to employers by eliminating the cost of purchasing, processing, and distributing paper checks, not to mention reducing bank fees and postage.

Direct deposit

___ __ is one way to improve the efficiency and reduce the costs of payroll processing.

Direct deposit

Employee paychecks also typically include an ___ ____, which lists the amount of gross pay, deductions, and net pay for the current period and year-to-date totals

Earnings statement

A second strategic benefit of an integrated HRM/payroll data model is that staff can perform many HRM activities more ____, thereby ____ costs.

Efficiently Reducing

___ ___ ___ can transmit time and attendance data directly to the payroll processing system.

Electronic time clocks

Payroll processing can be made more efficient by collecting employee time and attendance data ____ instead of on paper documents.

Electronically

The IRS provides a checklist of questions that can be used to determine if a worker should be classified as an ___ or an independent ___.

Employee Contractor

Although direct labor costs are a small portion of the total manufacturing costs, _____ are a key cost driver when it comes to their performance which affects the quality of the products being manufactured.

Employees

The ____ pays some payroll taxes and employee benefits directly. The IRS Circular E, Employer's Tax Guide, provides detailed instructions about employer's obligations for withholding and remitting payroll taxes, and for filing reports.

Employer

The complexity of payroll processing makes it susceptible to ____. Processing errors can lead to ____ if the errors result in failure to remit the proper amount of payroll taxes due the government.

Errors Penalties

For numeric data in the employee-number and hours worked fields

Field checks

Many employers also offer their employees ____ ____ plans, under which the employee receives some minimum coverage in medical insurance and pension contributions.

Flexible benefit

Companies hire temporary employees or outside help to get around a hiring ___.

Freeze

The HRM provides information about ___, ____, and ______ changes due to pay raises and promotions

Hiring Termination Pay-rate

The various departments provide data for the ___ worked. The government provides the ____ information and requirements. The principal output for the payroll cycle is ___.

Hours Tax Checks

What are the questions for future workforce staffing needs?

How many employees are needed in the next five years to accomplish the organization's strategic plans? Which employees possess the needed skills? Which skills are in short supply? Which skills are in oversupply? How effective are current training programs in maintaining and improving employee skill levels?

HRM

Human resource management

A recurring set of business activities and related data processing operations associated with effectively managing employee workforce

Human resource management (HRM)/payroll cycle

What are threats for validate time and attendance data?

Inaccurate Time and Attendance Data

What is a threat to preparing payroll?

Inaccurate processing of payroll

Appropriate application controls, such as validity checks and field (format) checks, further ___ the accuracy of data entry when using ____ documents

Increase Electronic

Hiring unqualified employees can ____ production expenses, and hiring a larcenous employee can result in ___ of assets.

Increase Theft

Inaccuracies in time and attendance records can result in ___ labor expenses and erroneous labor expense reports.

Increased

Unauthorized changes to the payroll master file can result in ____ expenses if wages, salaries, commission, or other base rates are falsified.

Increased

A second major function of the AIS in the HRM/payroll cycle is to provide adequate ____ ____

Internal controls

___ and ___ generated information is needed to make these decisions.

Internally Externally

On the hours worked field

Limit checks

What are the general threats for the HRM/payroll cycle?

Loss, alteration, or unauthorized disclosure of data Hiring unqualified or larcenous employees Violation of employment laws

Updating the payroll master file includes changes such as

New hires, terminations, changes in pay rates, and changes in discretionary withholdings.

1. Recruiting and hiring new employees 2. Training 3. Job assignment 4. Compensation (payroll) 5. Performance evaluation 6. Discharge of employees due to voluntary or involuntary termination Takes 1 and 6 are performed ___ and tasks 2 through 5 are performed ___

Once Repeatedly

What are the procedures for disbursing payroll?

Once paychecks have been prepared, the payroll register is sent to the accounts payable department for review and approval. A disbursement voucher is then prepared to authorize the transfer of funds from the company's general checking account to its payroll bank account. The disbursement voucher and payroll register are then sent to the cashier. The cashier reviews the payroll register and disbursement voucher and then prepares and signs a check transferring funds to the company's payroll bank account. The cashier also reviews, signs, and distributes the employee paychecks. The payroll register is then returned to the payroll department.

___ resumes are being used for hiring new employees

Online

The survey found that there are four key attitudes: Employees believe they have the ____ to do what they do best. They believe their _____ count. They think that coworkers are committed to _____. They understand the connection between their jobs and the company's ____

Opportunity Opinions Quality Mission

In an effort to reduce costs, many organizations are ___ their payroll and HRM functions.

Outsourcing

What is the final activity in the payroll process?

Paying the payroll tax liabilities and the other voluntary deductions of each employee

A separate ___ bank account provides additional protection against forgery or alteration.

Payroll

Easy-to-complete documents with clear instructions facilitate the accurate and efficient recording of ___ transactions

Payroll

It is also important that someone who does not authorize or record ___ should distribute paychecks and control the transfer of funds for direct deposit.

Payroll

The amount credited to the payroll account should be equal to the initial debit to the ____ account. This internal check is called a zero-balance check.

Payroll

A general ledger account that is used in a two-step process to check the accuracy and completeness of recording payroll costs and their subsequent allocation to appropriate cost centers

Payroll clearing account

A report that lists each employee's gross pay, payroll deductions, and net pay.

Payroll register

Maintains the payroll master file for each of its clients and performs the payroll processing activities.

Payroll service bureau

The government imposes stiff ____ on firms that violate provisions of employment law

Penalties

____ all documents facilitates checking that all transactions have been recorded

Prenumbering

PEOs

Professional employer organizations

What are controls for unauthorized changes to the payroll master file?

Proper segregation of duties is the key control procedure for dealing with this threat. Only the HRM department should be able to update the payroll master file for hirings, firings, pay raises, and promotions. Controlling access to the payroll system is also important

A well-designed HRM database also can be used to ___ recruiting costs

Reduce

Payroll service bureaus and PEOs are especially attractive to small and midsize businesses for the following reasons:

Reduced costs Wider range of benefits Freeing up of computer resources

Restricting access to programs that create documents and, if paper documents are still used, to blank documents, ___ the risk of unauthorized transactions

Reudces

Most employees are paid either on a fixed ____ or on an ___ basis (wages).

Salary Hourly

What is the controls for hiring unqualified or larcenous employees?

Skill qualifications for each open position should be stated explicitly in the position control report.It is especially important to verify a job application's skills and references, including college degrees earned, because research shows that approximately 30% of resumes contain false information.Background checks should also be conducted

Some believe that the value of employees' ___ and ____ is several times greater than the value of a company's tangible assets.

Skills Knowledge

Access to current, accurate information about employee skills and knowledge can also provide an organization with ____ benefits.

Strategi c

What is a threat for disbursing payroll?

Theft or Fraudulent Distribution of Paychecks

When organizations outsource payroll processing, they send ____ and ____ data along with information about personnel changes to the payroll service bureau or PEO at the end of each pay period.

Time Attendance

For those paid on an hourly basis, many companies use a ___ ___ which is used to record the hours worked. The time card also includes the total hours worked for a pay period.

Time card

It is important that all payroll changes are entered in a ___ manner and are properly reflected in the next pay period

Timely

What is the objective of the HRM function?

To efficiently hire, develop, retain, and dismiss employees

What are threats of updating payroll master file?

Unauthorized changes to the payroll master file Inaccurate updating of payroll master data

Special procedures should be used to handle ___ paychecks because they indicate the possibility of a problem, such as a nonexistent or terminated employee.

Unclaimed

The five basic activities performed in the payroll cycle are:

Update payroll master file. Validate time and attendance data. Prepare payroll. Disburse payroll. Disburse payroll taxes and miscellaneous deductions.

Check of the employee number

Validity check

However, accounting and the AIS have not traditionally measured or reported this value of the employees. The only value of the employee has been the ____ and ____ expense for direct labor, which is included in the work-in-process inventory. Recognizing the value of employees' knowledge and skills can help companies better understand the true ____ associated with ___ turnover.

Wage; Salary Costs; Excessive

Not only processes payroll but also provides HRM services such as employee benefit design and administration.

Professional employer organizations

Experts estimate that the cost of replacing employees is ___ times greater than that of an employee's annual salary

1.5

A second major function of the AIS in the HRM/payroll cycle is to provide adequate internal controls to ensure meeting the following objectives

All payroll transactions are properly authorized. All recorded payroll transactions are valid. All valid, authorized payroll transactions are recorded. All payroll transactions are accurately recorded. Applicable government regulations regarding remittance of taxes and filing of payroll and HRM reports are met. Assets (both cash and data) are safeguarded from loss or theft. HRM/payroll cycle activities are performed efficiently and effectively.

A Gallup survey found that an employee's ____ affects profitability

Attitude

Providing space on both paper and electronic documents to record who completed and who reviewed the form gives evidence that the transaction was properly ____

Authorized

A second major function of the AIS in the HRM/payroll cycle is to provide adequate internal controls to ensure meeting the following objectives: All payroll transactions are properly ___. All recorded payroll transactions are ___. All valid, authorized payroll transactions are ___. All payroll transactions are ____ recorded. Applicable government regulations regarding remittance of ___ and filing of payroll and HRM reports are met. Assets (both cash and data) are ____ from loss or theft. HRM/payroll cycle activities are performed ____ and ___

Authorized Valid Recorded Accurately Taxes Safeguarded Efficiently; effectively

Payroll processing can be made more efficient by collecting employee time and attendance data electronically instead of on paper documents. Those data are then ____ fed to the payroll processing system.

Automatically

What are controls for loss, alteration, or unauthorized disclosure of data?

Backup and disaster-recovery procedures provide the best controls for reducing the risk of payroll data loss.Physical and logical access controls are important preventive measures to mitigate this threat.Access and processing integrity controls are also needed to ensure the confidentiality and accuracy of payroll cycle data transmissions.Use of encryption and tokenization.Finally, protecting the privacy of employee data also is important

What are controls for inaccurate processing of payroll?

Batch totals should be calculated at the time of data entry and then checked against comparable totals calculated during each stage of processing.Hash totals of employee numbers are particularly useful. If the original and subsequent hash totals of employee numbers agree, it means that:All payroll records have been processed.Data input was accurate.No bogus time cards were entered during processing. Cross-footing the payroll register A payroll clearing account

Most employees are paid by either ___ or ___ ___.

Check Direct deposit

Companies either prepare ____ or use ___ ___ ___ to pay the taxes and deductions.

Checks Electronic funds transfer

Sales staff often are paid either on a straight ____ or on a salary plus commission basis.

Commission

What are the recordings for each pay period?

D. Payroll account C. Deductions payable C. Cash for net pay

Then when direct and indirect labor is used in manufacturing the recording is:

D. WIP for DL D. MO for IL C. Payroll account

Lists the miscellaneous voluntary deductions for each employee.

Deduction register

Controlling access to the payroll system is also important. The system should be programmed to compare user IDs and passwords with an access control matrix that:

Defines what actions each employee is allowed to perform Confirms what files each employee is allowed to access

___ morale is also important

Employee