Accounting Information Systems

Fourteenth Edition

Chapter 15
The Human Resources
Management and Payroll
Cycle

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 Learning Objectives
• Describe the major business activities, key decisions, and
information needs in the HRM/payroll cycle, the general
threats to those activities, and the controls that can
mitigate those threats.
• Explain the payroll cycle activities, key decisions, and
information needs, the threats to those activities, and the
controls that can mitigate those threats.
• Discuss and evaluate the options for outsourcing
HRM/payroll cycle activities.

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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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 General Issues HRM/Payroll

Threats Controls
1. Inaccurate or invalid data 1 a. Data processing integrity controls
2. Unauthorized disclosure of sensitive b. Restrict access to master data
information c. Review changes to master data
3. Loss or destruction of data 2 a. Access controls
4. Hiring unqualified or larcenous employees b. Encryption
5. Violations of employment laws 3 a. Backup and Disaster recovery
4 a. Sound hiring procedures
5 a. Documentation of hiring
b. Continuing education on changes to
employment laws

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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. Unauthorized changes to payroll master 1 a. Access controls and segregation of
data duties
2. Inaccurate updating of master data 2 a. Data processing integrity controls
3. Inaccurate time and attendance data 3 a. Supervisory review
4. Errors in processing payroll 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 Controls
1. Theft or fraudulent distribution of 1 a. Restrict access to blank payroll checks
paychecks and check signing machine
2. Failure to make required payments b. Use separate account (imprest fund)
3. Untimely payments 2 a. Configure system to make automatic
4. Inaccurate payments 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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 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 systems • Payroll clearing account
• Time card • Flexible benefits plan
• Time sheet • Payroll service bureau
• Payroll register • Professional employer organization
(PEO)

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