Question

Payroll Internal Controls Activity

Using the figure from your book of the payroll accounting system procedures, list an effective internal control activity for each process, and how you would implement it. It could be a preventive, detective, or corrective.

1. Record hours worked or units produced:...............................................................

2.Compute gross pay, deductions, and net pay:.....................................................................

3.Complete payroll register:.....................................................................

4.Prepare various payroll reports:.....................................................................

5.Record payroll in accounting books:.....................................................................

6. Makepayments to employees (cash, check, or electronic deposit):.....................................................................

7.Update employees’earnings records:.....................................................................

8.Maintain payroll deduction records:.....................................................................

this is from accounting: internal control chapter. the required that list an effective internal control activity for each process (number 1, number 2.....number 9). it could be preventive, dedective, corrective. Then How you would implement it.

Answer 1

Payroll Internal control activity :

List of activity includes :

1. Record hours worked or unit produced – This should be first part of Payroll Internal Control system . We need to track about record hours worked and documented properly .

On the basis of correct captured of hours ,we can make proper calculation of employee wages payment .

Records hours can be captured through Bio Metric system or badge system . Every company maintain proper hourly record to calculate correct salary and wages of employee .

We need to ensure that Automated time keeping system . Not allowing Overtime without a supervisory override . Also , any exceptional reports generated by theses clocks to supervisor for review

Always have a supervisor approve hours worked bt employees to prevent employees from changing more time than they actually worked .

2. Compute of Gross Pay, deduction and net pay – While doing Salary calculation , HR team should collect all relevant documents in this matter and they opt for preventive measure for not calculating any error as well as not to pay any ghost employee . All employee salary must be backed by actual hours worked + any deduction must be as per Statutory dues ( rules and regulations )
3. Complete payroll register / Maintain or prepare various payroll reports and record payroll in accounting books –

While doing payroll payment – please consider following points :

1. As per the federal Government ,every organization to withhold a percentage of a pay check for both employee as well as employer . The taxes included Social Security, Medicare, unemployment, federal income tax
2. Payroll register is record of all pay details for employee during a specific period of time . The payroll register list information about each employee for things such as Gross pay , net pay and deductions . Normally we get following information in Payroll register :

Name , Pay period , pay date , regular hours, Overtime hours , pay rate , Gross pay , federal state , local income tax , other deduction and net pay    

      Finally payroll register need to reconcile with Accounting record – Like: We normally see following payroll transactions in the ledger :

1. Salary /Wages Expenses b) Employer liability c) Employee liabilities ( withholding and deductions )
2. While doing reconciliation, we need to check following details are correct :

Withholding and deductions , Employer tax, Hours worked ( including Overtime , vacation and sick leave etc) , Wages and salaries

3. Print out payroll register – Match each hourly employees time card to pay register – Make sure the pay rates and salaries for each employee are correct
4. Make entries in general ledger according to Payroll register

6)Make payments to employee ( cash , check or electronic deposit ) –Company should pay employees from a separate checking account and fund this account only in the amount of the check paid out .Doing so prevents someone from fraudulently increasing the amount on an existing pay check or creating entirely new one