Top Banner
Hall, Accounting Information Systems, 8e ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Accounting Information Systems, 8e James A. Hall Chapter 6 The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures 1
36
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Accounting Information Systems, 8e

James A. Hall

Chapter 6

The Expenditure Cycle

Part II: Payroll Processing

and Fixed Asset Procedures

1

Page 2: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Objectives for Chapter 6

Fundamental tasks of payroll and fixed asset processes

Functional depts. of payroll and fixed asset activities and the flow of transactions through the organization

Documents, journals, and accounts needed for audit trails, record maintenance, decision making, and financial reporting

Exposures associated with payroll and fixed asset activities and the controls that reduce these risks

Operational features and the control implications of technology used in payroll and fixed asset systems

2

Page 3: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

DFD of Payroll Procedures

3

Figure 6-1

Page 4: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conceptual Payroll System

Personnel dept. uses personnel action

forms to:

activate new employees

change the pay rate of employees

change marital status and/or number of

dependents

terminate employees

4

Page 5: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conceptual Payroll System

Production employees fill out two forms:

job tickets - account for the time spent by

the worker on each production job

time cards - used to capture the total time

worked each pay period for payroll

calculations

• must be signed by a supervisor

5

Page 6: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conceptual Payroll System

Cost Accounting dept:

uses the job tickets to allocate labor costs to WIP accounts

summarizes these charges in a labor distribution summary which is forwarded to G/L dept.

6

Page 7: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conceptual Payroll System

Payroll dept receives personnel action forms and

time cards.

Uses them to:

prepare the payroll register

enter the information into the employee payroll

records

prepare paychecks

send paychecks to Cash Disbursements and a copy of

the payroll register to Accounts Payable

7

Page 8: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conceptual Payroll System

Accounts Payable dept:

prepares a cash disbursements

voucher for the total amount of the

payroll

sends copies to the Cash

Disbursements and G/L depts.

8

Page 9: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Conceptual Payroll System

Cash Disbursements dept:

reviews and signs the paychecks and forwards them to a paymaster for distribution to the employees

writes a check for the payroll and deposits it into the payroll imprest account

9

Page 10: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Basic Technology Payroll System

10

Page 11: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll Physical Controls

Transaction authorization - the personnel action form helps prevent:

terminated employees from receiving checks

wage rates from being improperly changed for current employees

11

Page 12: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll Physical Controls

Segregation of Duties -

timekeeping and personnel

functions should be separated

Supervision - need to monitor

employees to ensure they are not

“clocking in” for one another

12

Page 13: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll Physical Controls

Accounting Records - audit trail includes:

time cards

job tickets

disbursement vouchers

labor distribution summary

payroll register

subsidiary ledger accounts

general ledger accounts

13

Page 14: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll Physical Controls

Access Controls - need to prevent

employees from having improper

access to:

accounting records, such as time cards

which can be altered

unsigned checks

14

Page 15: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll Physical Controls

Independent Verification:

verification of time cards

distribution of paychecks to

authorized employees

verification of accuracy of payroll

register by A/P dept.

G/L dept. reconciles the labor

distribution summary and the payroll

disbursement voucher15

Page 16: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll IT Controls: Input

Edit controls will minimize risk of corrupt WIP,

employee records, and payroll register

Checks for missing data, numeric-alphabetic data, and

invalid data values• reduce the risk of undetected data entry errors by clerks in the cost

accounting, personnel, payroll, accounts payable, and cash

disbursements departments.

Check digit control• provides control over accessing the wrong employee records by

payroll and personnel clerks.

16

Page 17: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll IT Controls: Processing

ERROR MESSAGES.

Any mismatch when posting time card or personnel

action data to employee records should produce an

error message to the computer operator.

PASSWORDS.

Password control should be implemented on

department computers to reduce the risk of

unauthorized access to payroll files.

FILE BACKUP.

Backup procedures will reduce the risk of data loss

due to file destruction and/or corruption.17

Page 18: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Payroll IT Controls: Output

Output controls pertain to the loss or misdirection

of journal vouchers, account summaries, and

payroll checks.

Output controls include e-mailing the digital copies of

the documents to secure mail boxes or having the

documents physically collected by authorized

personnel (or security officer).

Direct deposit of digital paychecks into employee bank

accounts provides good control and eliminates the

need for a separate paymaster function.

18

Page 19: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Advanced Technology Payroll

Payroll can be reengineered as a part of human

resource management (HRM).

IT can process a wide range of personnel-

related data, including:

employee benefits

labor resource planning

employee skills and training

pay rates, deductions, and pay checks

evaluations

19

Page 20: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Integrated Payroll and HRM system

20Figure 6-10

Page 21: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Operating Features

Personnel - can make changes to the employee file in real time

Cost Accounting - enters job cost data either daily or in real time

Timekeeping - enters the attendance file daily

Data Processing - still uses batch processing and prepares all reports, the checks, and updates the general ledger

21

Page 22: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Modern Time-Keeping Systems

Biometric time clocks verify employees’ identities by using fingerprint or hand-vein

scan technology.

Magnetic swipe ID cards work like a credit card the employee swipes the card through

the time clock to record start and end time on the job.

Proximity cards are similar to swipe cards but don’t require the user to slide the

card through a reader.

Mobile remote devices allow employees to clock in using handheld devices (PDA or

cell phone) or web browsers from laptop computers. 22

Page 23: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Advanced Tech. Physical Controls

23

Page 24: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Advanced Technology IT Controls

24

Page 25: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Fixed Asset System (FAS)

Fixed Assets - property, plant, and

equipment used in the operation of a

business

25

Page 26: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Objectives of FAS

Acquire fixed assets in accordance with management approval and procedures

Maintain adequate accounting records of asset acquisition, cost, description, and location

Maintain depreciation records for depreciable assets in accordance with acceptable method

Provide management with information to help it plan future fixed asset investments

Properly record the retirement and disposal of fixed assets

26

Page 27: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

DFD of Fixed Asset System

27

Page 28: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Asset Acquisition

Begins when a dept. manager determines that an

old fixed asset needs to be replaced or that a

new fixed asset is warranted

A purchase requisition is filled out.

May require an authorizing signature for items over a

pre-specified limit

FAS dept. performs record-keeping functions.

28

Page 29: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Asset Maintenance

Involves adjusting FAS subsidiary account

balances as assets depreciate

Depreciation calculations are internal transactions

that the FAS system bases upon a depreciation

schedule.

Physical improvements must also be recorded to

increase the subsidiary account balance and

depreciation schedule.

29

Page 30: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Asset Disposal

At the end of an asset’s useful life (or

earlier disposition), the asset must be

removed from the records and

depreciation schedule

Disposals require disposal request

forms and disposal reports as source

documents.

30

Page 31: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Computer-Based Fixed Asset System

31

Page 32: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Physical Fixed Asset System—

Acquisition

Receipt of assets are digitally recorded in

the system, along with information such

as its useful life, depreciation methods,

etc.

Ledgers are automatically updated

32

Page 33: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Physical Fixed Asset System—

Maintenance

Computerized FAS automatically:

calculate current period’s depreciation

update accumulated depreciation and book-value

fields in the subsidiary records

post total depreciation to the affected general ledger

accounts

record depreciation transactions by adding records to

the journal voucher file

33

Page 34: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Physical Fixed Asset System—

Disposal

Computerized FAS automatically:

post adjusting entries to the fixed asset

control account in the general ledger

record losses or gains associated with the

disposal transaction

prepare journal voucher records

34

Page 35: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Fixed Asset System Controls

Authorization - should be formal and explicit

because of high cost of FAS:

acquisitions

changes in depreciation methods

Supervision - threat of misappropriation

requires constant management oversight:

theft - secure physical locations of assets

misuse - monitor on-the-job activities

35

Page 36: Pp 06-new

Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Fixed Asset System Controls

Independent Verification - internal auditors

should periodically verify FAS records:

the reasonableness of factors used in decisions

(useful life, discounts, budgeting model)

location, condition, and fair value of the fixed

asset records in the subsidiary ledger

the programming logic for automatic calculations

(depreciation)

36