Payroll Cycle
Overview
Recording of time worked by employees
Processing of weekly/ monthly payrolls
Allocation of payroll expenses
Payment to employees/ deductions
Main functions of the cycle
The Human Resource function - finding, recruiting, screening and training job applicants.
Timekeeping function - accurate and timely recording of time and attendence.
Payroll Preparation function - administration of employee pay based on employee type, status, salary, wages an deductions.
Payment Preparation and Payout function - ensure that employees are paid their wages for only the hours that they have worked.
Deductions: Payments & Recording function - the responsibility of the compant to hold back certain portions of the wages earned due to statutory requirements
Documents in the cycle
Permenant employee file
Pre numbered employee change forms
Clock cards/ ID smart cards
Job time ticket/ Job card
Payslips
Pay packets
Tax Certificates
Unclaimed wage register
Deductions returns
Example of weakness/ risk
Internal Controls and Controls Objectives
Management control
Rotation of duties
Supervision and review
Segregation of duties
Personnel take leave regularly
Internal audit
Occurence / Validity
Authorisation
Classification
Accuracy
Recording
Cut-off
Sceanrio -An organisation does wage pay-outs every Friday of the week. When the pay-outs are done, the employees look for their pay packets that are discplayed on a table. Once they have identified their packet they will take it, and immediately leave the pay-out venue.
Weakness - There is no identification of the employees before they select their pay-packets. The foreman does not identify the employees, and they do not use their identification documents to verify their identity. The employees also do not sign a register as proof that they have received their wages.
Risk - Employees can take another person’s wages. The employees do not sign as proof that they collected their wages. They could deny receiving payment.
Substantive Testing
Validity/ Occurence
Occurence