Question

internal controls are an essential requirement of a payroll system in a large organisation. Evaluate the main relevant functions of the payroll system and explain the role played by internal control procedures

Answer 1

INTRODUCTION:

Every Organisation, including government, require employees to assist in meeting there goals and objectives. The cost of employing these individuals are reflected in salaries and wages and the associated benefits. The principal purpose of any payroll department is to pay the employees and remit associated deductions, taxes and benefits,internal controls are necessary for this department to function affectively, efficiently and with in the parameters set by the management

Functions of payroll system :
1) Hire and Promotion
Transfer and
Termination of
employees
2) Payroll changes
3) Timekeeping
4) Preparation of   
Payroll
5) Payment/   
Distribution of
Payroll
6) Payroll Records

Role played by internal control procedures:

Payroll internal controls are the procedures your business follows to protect its payroll information. Payroll controls and procedures prevent employees from accessing confidential information. Internal controls also prevent employees from stealing money from your business through overpayments and false time record.

Some of the internal controls are as follows :

1)Segregation of duties 2)Authorisation of payroll 3)Safeguarding payrole 4)Proper documentation 5)Independent checks and reconciliations 6)Classification and accuracy

It plays a prominent role of maintaining proper documents and records, payments for actual services are performed by authorised personnel at authorised rates, recording transactions properly, accurately and timely, proper classification of transactions etc.., are the roles played by internal control procedures.