Page 39 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
There may also be a variety of state reports to file. Further, an in-house
system that uses direct deposit requires the payroll staff to create a data-
base of direct deposit information and send it to the company’s bank,
which uses it to process direct deposits to employees; otherwise, this

would have to be handled by a payroll supplier. Third, the in-house
payroll database must be backed up and stored, which is normally han-
dled by the payroll supplier. Finally, an in-house system requires the
payroll staff to summarize all tax deposits, fill out remittance forms, and
file payments with the federal and state governments at regular inter-
vals. Consequently, no matter how much control a company may feel it
has by using an in-house computerized system, the payroll staff will

have a number of additional tasks to perform.
Controls for the in-house computerized payroll process are noted
in the boxes with bold lettering in Exhibit 1.5. Due to the assumed use
of a computerized timekeeping system, in the exhibit no controls are
required for timekeeping activities, since the computer can spot them.
(If a company does not have such a system, then review either the out-
sourced or manual control systems in Exhibits 1.3 or 1.7 for the controls
covering this area.) In addition to those controls shown earlier for the out-
sourced system, new controls are also needed for check stock and signa-

ture plates, both of which should be securely locked up at all times.
Be sure to note at the very end of the process flowchart the controls
for reviewing uncashed checks and performing bank reconciliations.
These controls are designed to spot payments made to employees who
are no longer with the company and who, therefore, never received the
checks (which were probably issued in error). These two controls can
be added to the earlier outsourced payroll system, though some suppliers

will notify a company of any uncashed checks, depending on the out-
sourcing arrangement.

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