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

Florida Atlantic University

Bhattacharya, Ph.D.

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
Personnel

Establish
pay status

Timekeeping

Measure &
record the
services
rendered

Payroll

Prepare
paychecks

Maintain
employee
records
Figure M 4-1

Accounts
Payable and
Cash
Disbursements

Issue and
distribute
pay checks

Cost
Distribution

General
Ledger

Post transDistribute costs

actions and
for employee prepare required
reports &
services
statements

Maintain
labor expense
records

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

Personnel
department

Employees

1.0
Establish
pay status

Employee earnings records

Bank

2.0
Measure and
record
services
rendered

4.0
Issue and
distribute
paychecks

Department
managers or
supervisors
3.0
Prepare
paychecks

6.0
Prepare
reports and
statements

Employees

Bank
Figure M 4-5

See text for details

General ledger records

5.0
Distribute
costs for
employee
services

Government
agencies

Managers

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: FileOriented 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

1
Provides
n
Skills
Figure M4-9

Taken by/for

Cashier

1
Personnel
action

1
Employee

Paid
to/by

m
Performs

Leads
to

n
Service
(Time)

Cash
disbursement
(payroll)
1
n
Withdraws
1

n
Cash

Risk Exposures Pertaining to the

Human Resource Management Cycle - I
Risk

Exposure(s)

1) Employment of unqualified
persons

1) Lower productivity and high

training costs

2) Employment of larcenous
persons

2) Possibility of loss of assets

and circumvented policies and
controls
3) Incorrect payroll records and
labor distribution summaries

3) Errors or omissions in time

records, including overtime
abuse

Figure M4-10

Risk Exposures Pertaining to the

Human Resource Management Cycle - II
Risk
Exposure(s)
4) Errors in payments to
employees

5) Incorrect disbursements of
paychecks to fictitious or
terminated employees, or
diversions of valid paychecks to
unentitled employees
6) Errors in charging labor
expenses or in stating payroll
liabilities
Figure M4-10 Continued

4) Possibility of over-payments
and/or adverse effects on
employee morale; erroneous
quarterly statements sent to
federal and state agencies
5) Excessive wage and salary costs

6) Incorrect levels for expense and

liability accounts

Risk Exposures Pertaining to the

Human Resource Management Cycle Risk

Exposure(s)

7) Violation of government
7) Possibility of penalties and fines
regulations and laws, with regard being assessed
to payments or reporting
requirements
8) Interception of data transmitted 8) Loss or alteration of data
via the web
9) Unauthorized viewing and
9) Loss of security over human
alteration of human resource data resource data
via the web
10) Breakdown of the Web server 10) Loss of data and delay in
processing transactions
Figure M4-10 Continued

III

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 welldesigned 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

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