Module 4: The Human Resource Management Cycle Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing Module 4: The Human Resource Management Cycle Slides Authored by Somnath Bhattacharya, Ph.D. Florida Atlantic University

Objectives of the Cycle 1) To ensure that the status, pay rates of salaries, and pay deductions of employees are authorized 2) To pay for actual services rendered 3) To record, classify, distribute, and report employee-related costs promptly and accurately

Typical Functions & Related Organizational Units of a Human Resource Management Cycle Accounts Payable and Cash Disbursements Cost Distribution General Ledger Personnel Timekeeping Payroll Measure & record the services rendered Issue and distribute pay checks Post trans- actions and prepare required reports & statements Distribute costs for employee services Establish pay status Prepare paychecks Maintain employee records Maintain labor expense records Figure M 4-1

Source Documents of Data Input Personnel Action Form Time and/or Attendance Form Job-Time Ticket Paycheck

A DFD of the Human Resource Management Cycle See text for details Personnel department Employees 1.0 Establish pay status Department managers or supervisors 2.0 Measure and record services rendered Employee earnings records General ledger records 3.0 Prepare paychecks Bank 4.0 Issue and distribute paychecks 5.0 Distribute costs for employee services 6.0 Prepare reports and statements Employees Government agencies Bank Managers Figure M 4-5

Data Processing: Manual Establishment of pay status Measurement of the services rendered Preparation of the paychecks Issuance and distribution of paychecks Distribution of the labor costs Preparation of the required reports

Data Processing: Computerized Time data entry Paycheck preparation Pay status changes

Information Output Operational Listings, Statements, and Required Reports Inquiry Screens Managerial Reports

Data Management: File-Oriented Approach Employee Payroll Master File Personnel Reference and History File Skills File Time Record Transaction File Paycheck Transaction File Compensation Reference File Personnel Planning File

An Entity-Relationship Diagram of the Human Resource Management Cycle Employee pay deductions Personnel clerk Cashier 1 1 1 Cash disbursement (payroll) 1 n Personnel action n Taken by/for 1 Paid to/by Employee 1 m 1 n Provides Performs Leads to Withdraws n n 1 n Service (Time) Cash Skills Figure M4-9

Risk Exposures Pertaining to the Human Resource Management Cycle - I Figure M4-10

Risk Exposures Pertaining to the Human Resource Management Cycle - II Figure M4-10 Continued

Risk Exposures Pertaining to the Human Resource Management Cycle - III Figure M4-10 Continued

Control Objectives All services performed by employees, including hours worked on specified tasks, are recorded accurately and in a timely manner All employees are paid in accordance with wage contracts or other established policies All paychecks are calculated accurately, with due allowance for authorized payroll deductions and approved benefit programs All costs for employee services are distributed to accounts in accordance with clearly established accounting policies All required reports are accurately and completely prepared in accordance with prescribed laws and regulations and submitted by their scheduled dates

Application Controls - I 1) Prepare pre-numbered and well- designed documents relating to payroll payables and cash disbursements 2) Validate data on time records as they are entered for processing by means of edit checks validity checks on employee numbers limit checks on hours worked field checks on key identification and amount data relationship checks on employee numbers and related departments

Application Controls - II 3) Validate the results of data processing by means of edit checks Sign check Cross-foot balance check 4) Correct errors detected during data entry 5) Issue personnel actions promptly on the basis of valid authorizations 6) Reconcile the hours reflected on job-time tickets with the hours shown on the attendance time cards

Application Controls - III 7) Pre-compute batch control totals on hours worked and on net pay amounts. Compare batch totals with totals computed during paycheck preparation and during postings to the employee payroll master file, respectively 8) draw paychecks on separate payroll-imprest bank account 9) Retain voided paychecks in order to account for all paycheck numbers 10) trace unclaimed paychecks back to the time records and employee payroll master file in order to verify that they belong to actual current employees

Application Controls - IV 11) Review a preliminary payroll register before the paychecks are printed in order to determine that all errors have been corrected 12) Print payroll account summaries periodically to enhance the audit trail

Web Security Procedures Authentication Authorization Accountability Data Transmission Disaster Contingency and Recovery Planning

Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing Copyright © 2000 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.