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Lect 19
Lect 19
PAYROLL AND
PERSONNEL CYCLE
CHAPTER 19
Key internal controls for payroll and personnel cycle for assessing
control risk:
• Adequate Separation of Duties: Payroll function should be kept
independent of the human resources department.
• Proper Authorization: Human resources should authorize additions and
deletions to payroll.
• Adequate Documents and Records: What is adequate depends on the
nature of the company’s payroll.
• Physical Control over Assets and Records: Access to unsigned payroll
checks should be restricted, as should access to direct deposit information.
• Independent Checks on Performance: A member of management or other
responsible employee should review payroll for obvious misstatements.
Design and Perform Tests of Details of Balances for Liability and Expense
Accounts (Phase II) (cont.):
The major expense accounts in the payroll and personnel cycle:
• Officers’ Compensation
• Commissions
• Payroll Tax Expense
• Total Payroll
• Contract Labor
Presentation and Disclosure Objectives: Usually not extensive, though some
complex transactions, such as stock options and executive officer compensation
plans, may require footnote disclosure.