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Accounting Information Systems CHAPTER 13 THE HUMAN RESOURCES MANAGEMENT/PAYROLL CYCLE SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 13.1 Payroll and HRM systems are separate in many companies because integration was generally not feasible using early data processing technology. Also, different events generate data and two different professions were interested in using the data. As a result, many companies (and their employees) became accustomed to having payroll data processed by the accounting fu
  Accounting Information Systems 13-1  © 2009 Pearson Education, Inc. Publishing as Prentice Hall   CHAPTER 13THE HUMAN RESOURCES MANAGEMENT/PAYROLL CYCLE SUGGESTED ANSWERS TO DISCUSSION QUESTIONS   13.1 Payroll and HRM systems are separate in many companies because integration wasgenerally not feasible using early data processing technology. Also, different eventsgenerate data and two different professions were interested in using the data. As a result,many companies (and their employees) became accustomed to having payroll dataprocessed by the accounting function and personnel data processed by the humanrelations function. Now that modern information technology makes integration morefeasible, employees in some companies are still likely to resist suggestions for changebecause they are comfortable with the old way of doing things. In addition, employeeswithin the accounting and personnel functions probably feel some degree of ownership of their data, and this is taken away when control of these data is transferred to acentralized data base function.Reasons for integrating the personnel and HRM systems include the following:    Integration will improve decision-making by providing access to more of the relevantdata needed for monitoring employee development.    It is logical, since both systems are organized around the same entity: the employee.    By eliminating the perception that a specific organizational function has ownership of a particular set of data, it should provide improved data access.    It should facilitate the retrieval and utilization of employee data when the datarequired would otherwise have to be obtained from both data bases.    It should facilitate the process of updating employee data, since a single updateprocess would replace two separate updating processes.    It should simplify the development and implementation of more complexcompensation schemes, such as flexible benefits or incentive pay.    Centralizing the administration of employee data under the control of data basemanagement software should enhance data security.    It should minimize or eliminate the cost of storing identical data in two differentdatabases.    It should minimize or eliminate the confusion that might otherwise arise when twodifferent databases use different data definitions, or report different values, for thesame data item.  Ch. 13: The Human Resources Management/Payroll Cycle 13-2  © 2009 Pearson Education, Inc. Publishing as Prentice Hall   13.2 This question should generate some debate. The issue is the trade-off between “subjectivity” in measuring the value of a company’s investment in the knowledge and skills of its employees versus the usefulness of at least attempting to explicitly measure those assets. In the “information era” the value of a company’s employee knowledge base is increasingly important. Attempting to measure it should facilitate more effectivemanagement of this resource by focusing more attention on it. 13.3 Formal reports on employee performance are not intended to replace direct observation,but to supplement it. Direct observation is important, but a manager cannot observe allemployees all the time. It is also difficult to accurately summarize detailed observationsacross time. Well-designed reports provide quantitative summary measures of aspects of employee performance that are believed to be important to achievement of the organization’s goals. Quantitative measures facilitate tracking performance trends over  time. These benefits, however, will be difficult for many managers to understand untilthey have had experience in using such reports. There are also legal issues at stake. If anemployee or former employee brings suit against the employer, supportingdocumentation may justify the empl oyer’s position.   13.4 From an economic point of view, there is no question that direct deposit should becomethe norm. Some students might raise objections, however, on the basis of restricting employees’ freedom of choice or, for some groups of workers , on access to and comfortwith dealing with banks. 13.5 Other threats are: not working or working less productively than if the employees wereworking onsite. Security risks such as the employee not proactively maintaining properantivirus and patch management practices, in addition they may not protect and/orbackup their data adequately. Software exists to enable companies to monitoremployees, including what they do on the Internet. In addition, a company could requirethat telecommuting e mployees login their company’s network and store all work relatedfiles on the company’s network and not on their home machines. Employees would also be required to login so that their machines could be updated with the latest antivirusprotection and patches. Most students should agree that companies have a right to expecttheir employees to not conduct a side business using company-provided resources. But,whether companies should try to prevent this through monitoring is certain to raise somelively discussion. Ask students if they have any first-hand knowledge of how theiremployers deal with this problem.  Accounting Information Systems 13-3  © 2009 Pearson Education, Inc. Publishing as Prentice Hall   13.6   A separate payroll account limits the company’s exposure to only the amount of cash deposited into the payroll account. A separate account is also easier to reconcile and todetect any errors or irregularities.  SUGGESTED ANSWERS TO THE PROBLEMS   13.1 a. A hash total of employee wage rates should be maintained by the personneldepartment, and checked against the total on the payroll master file after each updateof that file. Also, a reasonableness test of wage rate changes during data entry coulddetect this type of error if the dollar amount was large.b. Access controls should be used to limit the ability to add new records to the payrollmaster file to only the HR department. A report of all changes to the payroll masterfile should be regularly run and all changes should be verified.c. A limit check should be used during the data entry process to check the hours-workedfield for each employee transaction record.d. The computer operator's password should not allow access to the payroll master file,and a compatibility test should be performed on all transactions entered to verify thatthe operator's password indicates that he/she has the appropriate access andmodification authority. A backup control would be a batch total of all salariesmaintained by the personnel department and checked against a corresponding totalgenerated during each payroll run.e. Paychecks should be distributed by the payroll department, not the employee’s supervisor.f. Job time data prepared or approved by factory supervisors, or captured usingautomated data collection equipment, should be reconciled with employee clock cardsprior to payroll processing. Observation of time clock use might also uncover  punching other people’s cards. The use of biometric controls to record time in and time out would also prevent this type of problem.g. There should be control over access to payroll and other current master files, in theform of a file library function that restricts access to files to those who haveappropriate authority. As in part (d), a backup control would be a batch total of allsalaries maintained by the personnel department and checked against a correspondingtotal generated during each payroll run.h. A record count of job time records could be prepared before the records are submittedfor processing, and checked subsequent to data entry against the number of paychecksprepared. In addition, reconciliation of job time records to employee clock cards  Ch. 13: The Human Resources Management/Payroll Cycle 13-4  © 2009 Pearson Education, Inc. Publishing as Prentice Hall   should detect this. Also, a report, such as the payroll register, should be printed alongwith paychecks. The total number of employees listed on the payroll register shouldmatch the number of employees in the payroll master file  –  any discrepancies shouldbe promptly investigated.i. All active files should have internal file labels identifying their contents andexpiration date, and all programs should check the file labels prior to processing. Inaddition, backup copies of all current files should be maintained. 13.2  (CPA Exam, May 1993, Auditing Question Unofficial Answer, adapted) Question   Y/N   Threat if control missing  1. Are payroll changes (hires,separations, salary changes, overtime,bonuses, promotions, etc.) properlyauthorized and approved?1. Unauthorized payraisesand fictitious employees.2. Are discretionary payrolldeductions and withholdingsauthorized in writing by employees?2. Errors; lawsuits byemployees; penalties if violate taxcode.3. Are the employees whoperform each of the following payrollfunctions independent of the other fivefunctions?    personnel and approval of payroll changes    preparation of payroll data    approval of payroll    signing of paychecks    distribution of paychecks    reconciliation of payrollaccount3. Fraud; theft of paychecks.
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