Accounting Information Systems

Fourteenth Edition, Global Edition

Chapter 15
The Human Resources
Management and Payroll
Cycle

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

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.

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 2
Human Resource Management Process
• Recruit and hire new employees
• Training
• Job assignment
• Compensation (payroll)
• Performance evaluation
• Discharge of employees (voluntary or involuntary)

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 3
General Issues HRM/Payroll
Threats Controls
1. Inaccurate or invalid data 1 a. Data processing integrity
2. Unauthorized disclosure of controls
sensitive information b. Restrict access to master
data
3. Loss or destruction of data
c. Review changes to master
4. Hiring unqualified or larcenous data
employees 2 a. Access controls
5. Violations of employment laws b. Encryption
3 a. Backup and Disaster recovery
4 a. Sound hiring procedures
5 a. Documentation of hiring
b. Continuing education on
changes to employment laws

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 4
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

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 5
1. Update Master Payroll Data
2. Validate Time and Attendance Data
3. Prepare Payroll
Threats Controls
1. Unauthorized changes to 1 a. Access controls and
payroll master data segregation of duties
2. Inaccurate updating of master 2 a. Data processing integrity
data controls
3. Inaccurate time and 3 a. Supervisory review
attendance data b. Source data automation for
4. Errors in processing payroll data capture
4 a. Data processing integrity
controls
b. Supervisory review

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 6
4. Disburse Payroll
5. Disburse Payroll Taxes
Threats Controls
1. Theft or fraudulent distribution 1 a. Restrict access to blank
of paychecks payroll checks and check
2. Failure to make required signing machine
payments b. Use separate account
3. Untimely payments (imprest fund)
4. Inaccurate payments 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

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 7
Reasons to Outsource Payroll
• Reduce costs
– Cost of processing and minimize errors
• Broader range of benefits
– Administration of benefits
• Free up computer resources

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 8
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)

Copyright © 2018 Pearson Education, Ltd. Chapter 15: The Human Resources Management and Payroll Cycle Slide 1 - 9