Payroll and Personnel Cycle

Payroll And Personnel Cycle

Our overall objective in the audit of the payroll and personnel cycle is to evaluate whether the account balances affected by the cycle are fairly stated in accordance with applicable accounting standards. In reviewing the payroll info and payroll flowchart provided by Karina Ramirez, we are more familiar with the business functions and related documents and records in the payroll and personnel cycle.

We understand the following internal controls within the payroll and personnel cycle of Apollo Shoes, Inc.; there are adequate separation of duties, proper authorization, adequate documents and records, proper physical control over assets and records, and performance is independently verified. The personnel department of Apollo Shoes, Inc. must "approve all new hires, terminations, and hourly rate changes. Forms for each of these actions are approved by the appropriate supervisors and are kept in the personnel office" (Louwers & Reynolds, 2002, p. 125). A payroll change document is used to notify payroll by personnel clerks. The payroll department maintains the payroll records for all employees, including all forms related to any deductions. Hourly employees are paid utilizing time cards with a time clock machine. Timecards must be approved by a supervisor. Salaried employees are paid based on a salary schedule approved by the finance committee of the board of directors (Louwers & Reynolds, 2002, p. 125). A payroll clerk prepares the payroll register (multicopy) using the time cards and individual payroll informatio every two weeks. A "write-it-once" system is used that prepares a form showing gross pay, deductions, net pay, and year to date totals that is referred to as the "take-home sheet" (Louwers & Reynolds, 2002). Then two copies of the payroll register and take-home sheets are sent to accounts payable where a voucher is created for each sheet. The checks are prepared and forwarded to the treasurer's office, along with the payroll registers, the voucher, and the take-home sheets. The treasurer reviews the payroll register and take-home sheets that are then compared to the checks before signing. The treasurer's secretary takes the hourly employees' checks and accompanying take-home sheets are then given to their supervisors for distribution (Louwers & Reynolds, 2002, p. 125). Salaried employees pick their checks up from the treasurer's office. One copy of the payroll register representing paid checks is kept in the treasurer's office, and the second copy is sent to accounts payable along with the vouchers that are marked paid (Louwers & Reynolds, 2002).

Apollo Shoes, Inc. has good internal controls in place with proper documentation and separation of duties. To test controls related to occurance, we would examine time cards for authorized approvals, review personnel policies, review personnel files, review the organizational chart, talk to employees, observe employees performing tasks, verify that all employees paid are actual employees,