TRANSACTION FILESCHAPTER 8 HUMAN RESOURCE BUSINESS PROCESS(THE PAYROLL PROCESS)AFTER STUDYING THIS CHAPTER YOU SHOULD BE ABLE TO:1. IDENTIFY THE MAJOR ACTIVITIES OF THE HUMAN RESOURCE BUSINESS PROCESS2. EXPLAIN HOW EMPLOYEES ARE HIRED, ASSIGNED DUTIES, AND PAID3. ****DESCRIBE THE FLOW OF TRANSACTIONS THROUGH THE HUMAN RESOURCE PROCESS4. ****SPECIFY THE PRINCIPAL MASTER AND TRANSACTION FILES IN THE HUMAN RESOURCE PROCESS AND EXPLAIN THEIR CONTENT AND USE5. ****IDENTIFY THE PRINCIPAL DOCUMENTS AND REPORTS IN THE HUMAN RESOURCE PROCESSTHE HUMAN RESOURCE PROCESS IS1CONCERNED WITH THE PROCUREMENT OF EMPLOYEE RESOURCES BY THE ORGANIZATION -INCLUDES ACCOUNTS PAYABLEPERSONNELPAYROLLCASH DISBURSEMENTCOST ACCOUNTINGAPPLICATIONSINCLUDES COST ACCOUNTING - INTERFACESWITH PRODUCTION (INVENTORY) PROCESSCASH DISBURSEMENTS - INTERFACES WITH THE FINANCING PROCESS2DATA STORAGE, INPUTS, AND OUTPUTS IN THE HUMAN RESOURCE PROCESSMASTER FILES1. EMPLOYEE MASTER FILE.EMPLOYEES= WAGE RATES AND SALARIES.DATA ON MARITAL STATUS AND NUMBER OF DEPENDENTS--A PAY RATE FILE MAY BE USED HERE ALSO.DATA ON ACCRUED EARNINGS, DEDUCTIONS, FRINGE BENEFITS.EACH RECORD CORRESPONDS TO AN EMPLOYEE.TERMINATIONS HANDLED AT YEAR END TO RETAIN INFO NEEDED FOR TAX PURPOSES.ORDERED ON EMPLOYEE#, WHICH MAY BE SS#2. ADDITIONAL MASTER FILE MAY BE USED TO HOLD TAX INFORMATION, TAX TABLE FILE (A REFERENCE FILE)3. GENERAL LEDGER MASTER FILE--FOR POSTING OF GENERAL LEDGER ACCOUNTS3TRANSACTION FILES1. PAYROLL TRANSACTION FILE.DATA ON EMPLOYEES' SERVICES.COMPUTED TAX WITHHOLDINGS AND OTHER DEDUCTIONS WRITTEN TO RECORDS IN THIS FILE PRIOR TO PREPARATION OF CHECKS.MAIN PURPOSE TO ACCUMULATE DATA ON HOURS WORKED AND OTHER INFO NEEDED TO PREPARE THE PAYROLL.PAYROLL TRANSACTION FILE IS POSTED TO ....?PAYROLL DATA INTERFACES WITH THE INVENTORY (CONVERSION) PROCESS2. GENERAL LEDGER TRANSACTION FILEINPUT DOCUMENTS1. TIME CARDS, SHEETS, TICKETS OR COMMISSIONVOUCHERSdocument services provided by employeesprovide a basis for the payment of wages, salaries, or sales commissions4OUTPUT DOCUMENTS1. PAYROLL CHECKSdrawn on organization's bank account to disburse cash to employees2. TAX FORMS, SUCH AS W-2sREPORTS1. PAYROLL REGISTER2. DEDUCTIONS AND WITHHOLDINGS JOURNAL3. QUARTERLY AND ANNUAL PAYROLL TAX RETURNS4. LABOR DISTRIBUTION REPORTMAJOR RISKS IN THE HUMAN RESOURCES PROCESS51. Risks concerning procurement of employee services .wages paid for unauthorized work.time cards and/or pay checks to fictitious employees.wages/benefits to employees who have been terminated.errors in pay rates or calculations - under vs. over stated.improper accrual of sick leave, vacation, pension.expense incorrectly classified or charged to wrong period.intentional overstatement of employee earnings - kickback scheme.deductions/withholdings not recorded but charged to employee2. Risks concerning disbursement of cash.duplicate payments.checks made out to or sent to wrong payee.check signature forged - or void notation erased.improper or illegal check requests or payments.cash disbursements incorrectly recorded or not recorded6.disbursement and distribution of checks occur in different periods.check is made out to unauthorized individual.manipulation of bank reconciliation to offset misappropriations against old outstanding checksCONTROLS1. ORGANIZATIONAL CONTROLSsegregation of duties in payroll.segregation maintained between (1) hiring and setting wage rates (2) collection and approval of time cards (3) preparation of paychecks (4) distribution of paychecks signing paychecks should be separated from (3)if number of employees is too small to achieve proper segregation of duties......use imprest fund2. Program and Data Access Controlsuser identification codespasswords - levels of access7file and record locksdesignated terminal accessdata read-write privilege3. Authorization Controlsto ensure that input data are authorizedproper authorization for capturing and approving employee time data for disbursing cash.authority to validate employee services -time data capture and approval resideswithemployee's immediate supervisorovertime or special time ratesexception reports of rejected transactionsauthority to disburse cash - lies with payroll dept. for payroll disbursementstreasurer has ultimate responsibilitycheck signing machine & signature plateslocked 84. Data Verification Controlsreasonableness checks - pay rates and hourspositive / negative quantitiessupervisory approval is mandatory on all exceptionitems5. Processing Controlsa. batch controlsrecord countscontrol totalscross footingshash totalsextend throughout processing b. prenumbered documents - ensure that all processing is completeUse prenumbered checksiventory boxes of blank checkscontrol check inventory6. File Controlsprotect data from loss, damage, improper processingensure that correct master or table files areusedfile maintenance97. Output Controlsoutput from system is complete, accurate, appropriately usedcheck registerpayroll registercheck formsbank reconciliation independent of check printing and