Page 40 - Essentials of Payroll: Management and Accounting

EXHIBIT 1.5 Cr eating a Payr oll System
Controls for the

In-House Computerized Payroll Process

Obtain
Control
approval of
check stock.
pay changes.
Investigate Transfer Process Print and Compare
Create
missing time timekeeping payroll on review OK? paychecks. addresses on
card scans. file to payroll in-house preliminary employee
system. software. payroll reports. paychecks.
No
Obtain Issue
Control
approval of signature paychecks list
negative to department
deductions. plates. supervisors.
Send direct
deposit
instructions
to bank.
Deposit
Perform Review Issue checks withheld and
bank uncashed directly to
reconciliations. checks. recipients. matching taxes
at bank.

Overview of the In-House Manual Payroll Process
An increasingly rarely used payroll system is the completely manual
approach that precludes all use of payroll suppliers or in-house computer
systems. This type of system is most commonly found in very small
organizations where the additional labor required to calculate wages
and taxes is not too onerous for the small accounting staff.
The manual process requires extra labor in three key areas. First,
employees are filling out time cards by hand or using a punch clock, so

the payroll staff must use a calculator to add up the hours worked, verify
the calculations (since this task is highly subject to errors), notify
employees about missing time entries, and have supervisors approve any
overtime hours worked. Second, the payroll staff must multiply hours
worked by hourly pay rates to determine wages for the nonexempt

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