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Transcript of Pp 06-new
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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
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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
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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
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Figure 6-1
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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.
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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
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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
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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
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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
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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
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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)
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