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Human Resource and Payroll Cycle: Submitted By: Ramos, Michaela Russell M. BSA 4-2

The document describes the human resource and payroll cycle process. It outlines the key steps and interactions between the user department, HR department, payroll department, treasury department, accounting department, and employees. It then discusses potential risks that can occur, such as inaccurately recording payroll transactions, payroll fraud, and unauthorized access to payroll records. It provides examples of physical and IT controls that can be implemented to mitigate these risks, including segregation of duties, transaction authorization, independent verification, file backups, and access controls.

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Michaela Russell Ramos
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381 views7 pages

Human Resource and Payroll Cycle: Submitted By: Ramos, Michaela Russell M. BSA 4-2

The document describes the human resource and payroll cycle process. It outlines the key steps and interactions between the user department, HR department, payroll department, treasury department, accounting department, and employees. It then discusses potential risks that can occur, such as inaccurately recording payroll transactions, payroll fraud, and unauthorized access to payroll records. It provides examples of physical and IT controls that can be implemented to mitigate these risks, including segregation of duties, transaction authorization, independent verification, file backups, and access controls.

Uploaded by

Michaela Russell Ramos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Human Resource

and Payroll Cycle


Submitted by: Ramos, Michaela Russell M.
BSA 4-2
Human Resources and Payroll Cycle
User Dept. HR Dept. Payroll Dept.
A
Employees Personnel
Records

Receives/reviews
Daily Time /update relevant
Record HR Dept. payroll related
into

Initiates, Determines
User Dept. terms of Reviewed Employee
updates
settlement payroll Earnings Accounts
and (termination
information Record Payable Dept.
maintains of
records. employee/s)
Monitor
and Labor Cost Inventory
approves Payroll Accounting
Summary
daily time Dept. Dept.
records
Updated
Personnel Treasury
Records Prepares Payroll
payroll Register
Approved register
General
DTRs
Accounting
A Dept.
Treasury Dept. Accounting Dept.

Payroll General Inventory


Register Accounting Accounting
Dept. Dept.

Reviews
payroll Reviews Records
register and daily inventoriable
prepares summaries/ labor costs
check documents

Daily Daily
Summary General Summary
Checks
Journal

Employees
WHAT CAN GO WRONG and
CONTROLS TO MITIGATE THESE RISKS
1. Inappropriately recording payroll transactions in accounts.
• Physical Controls:
✓ Accounting Controls – Maintain an audit trail adequate for tracing from its source
documents to the FS
✓ Independent Verification –
• (User Dept) Before submission of DTR, a supervisor must verify their accuracy
and sign them.
• (Payroll Dept) Verifies the payroll information
• (Treasury Dept) Verifies payroll register before creating a disbursement
vouchers/checks
• (Accounting Dept – GA) Provides verification of the overall process by
reconciling the labor cost summary and payroll disbursement checks/vouchers.
WHAT CAN GO WRONG and
CONTROLS TO MITIGATE THESE RISKS
• IT Controls:
✓ Data input edits – Verify the integrity of transaction data being entered into
the application.
✓ Error messages – Any mismatch should produce an error message
✓ File backup – Reduce the risk of data loss due to file destruction and/or
corruption.
✓ Automated posting to accounts – Eliminating human element reduces the
potential for errors and significantly improves efficiency of operations (ex.
Automatic employee timekeeping through biometrics/magnetic swipe ID
cards that reflects real-time time-in/time-out)
WHAT CAN GO WRONG and
CONTROLS TO MITIGATE THESE RISKS
2. Misappropriation of cash through payroll fraud.
• Physical controls
✓ Transaction authorization – Ensure only timecards of current and valid employees are processed
✓ Segregation of duties
✓ Use of independent paymaster to distribute checks
✓ Supervision – Observe timekeeping process and reconcile timecards with actual attendance
✓ Maintaining access control

• IT controls
✓ Limit tests to detect excessive hours reported per period
✓ Biometric scanners, swipe cards, and PINs to reduce risk of payroll fraud by ensuring that
individuals clocking into the system are valid employees
✓ Automated tests to validate employee timecards against a valid and up-to-date employee file
✓ Paycheck direct deposit options for employees
WHAT CAN GO WRONG and
CONTROLS TO MITIGATE THESE RISKS
3. Unauthorized access to payroll records and confidential
employee data.
• IT controls
✓ Password control
✓ Multilevel security to prevent unauthorized access to data.

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