Cycle: Human resources

Question 1

What should the human resources department be skilled in?

Answer 1

The department should be skilled in such things as recruiting, counselling, negotiating and labour law, as they will be involved in all of these things on an ongoing basis.

Question 2

What is the human resources department responsible for?

Answer 2

They will be responsible for keeping detailed records of all employees, executing the hiring and dismissing of staff and ensuring that pay rates and changes thereto, are correctly and promptly implemented.

Question 3

Why is time keeping required?

Answer 3

This function is required so that an accurate record of the hours for which an employee must be remunerated, is obtained so that the employee’s pay for the period can be calculated

Question 4

Who prepares the cash cheque?

Answer 4

A wage clerk will also prepare a cash cheque for the net amount of wages as well as cheques to pay over deductions to the relevant authority.

Question 5

State all of the functions within the human resource cycle

Answer 5

• Personnel
• Timekeeping
• Payroll preparation
• Payment preparation and payout
• Deductions: Payment and recording

Question 6

Explain the payroll preparation function

Answer 6

In this function, the amount which each wage earner is to receive, is calculated.

Question 7

What is the objective of the payment preparation and payout?

Answer 7

The objective of this function is to transfer the amount owed to employees as per the payroll.

Question 8

True or False

A wage payout can give rise to unclaimed wages:

Answer 8

True, at the conclusion of the payout, there may be unclaimed pay packets for employees who were absent on the day

Question 9

Where should the unclaimed wages be entered?

Answer 9

These should be entered into an unclaimed wage register and safeguarded as they are susceptible to theft. They are normally put under the temporary control of the paymaster who will distribute them as the employees return to work.
Unless an employee has given written permission for his or her pay packet to be released to say, another employee or family member, the pay packet should be retained by the company until the employee returns.

Question 10

What is the objective of the deduction: payment and recording function?

Answer 10

The objective of this function is to ensure that all deductions are actually paid over and that they are paid over within the stipulated time, accompanied by the necessary documents, correctly completed.

Question 11

Disclose all the documents used in the human resource cycle

Answer 11

• Employment contract
• Employee file
• Payroll amendment form
• List of employees
• Clock cards
• Batch control sheets and batch register
• Deduction tables and returns
• Payroll (wages journal)
• Pay packets, payslips, salary advices
• Unclaimed wages register
• Wages (or salary) reconciliation
• Logs, variance reports, etc

Question 12

Define the term employment contract/employee file

Answer 12

This document formalises the terms and conditions of employment. A copy is kept by the personnel department in the employee’s personnel file and/or could be stored electronically.

Question 13

Explain the term payroll amendment form

Answer 13

This document is used to detail and authorise changes made in the employee register which affect the workforce, for example new appointments, dismissals, promotions to higher grades, changes to pay rates.
In a computerised system these will be master file amendments to the employee master file.

Question 14

Explain the term list of employees

Answer 14

This is a list (register) of valid employees and their details, necessary for calculating wages and salaries, provided by personnel. In a computerised system it is called the employee master file.

Question 15

Define the term clock card

Answer 15

A card which records the hours which a wage earner has worked. Where hours are automatically downloaded onto the system from the timing device, clock cards are not necessary, but the employee will need to activate the timing device by inserting a swipe card (or similar device) or using a thumb or finger scanner.

Question 16

Explain the term batch control sheets and batch register

Answer 16

These documents identify batches of clock cards and control their movement between the timekeeping and payroll functions in the cycle. Commonly used in manual systems and in computerised systems where hours must be keyed in from clock cards.

Question 17

Explain the term deduction tables and returns

Answer 17

These are schedules or returns provided by the entities to which deductions from employees must be paid over, for example PAYE, medical aid. In a computerised system they will be held electronically on file.

Question 18

Define the term payroll (wages journal)

Answer 18

This document (journal) is a spreadsheet which lists employees’ names, their work section or cost centre, their overtime and normal hours worked, their gross pay, deductions, and net pay. Applies to both manual and computerised systems.

Question 19

Explain pay packets, payslips, salary advices

Answer 19

The cash due to the wage earner is placed in a pay packet. The payslip or salary advice, notifies the employees of how their remuneration is made up. Where payment is by electronic funds transfer, there will be no pay packets but the employees will still receive a payslip/salary advice.

Question 20

Explain the term unclaimed wage register

Answer 20

This is the book/journal used to record details of employees who have not collected their pay packets.
Does not apply if there is no wage payout.

Question 21

What is a wage (or salary) reconciliation?

Answer 21

This is a document that records the reconciliation of the current period’s wages to the previous period’s wages. (For salaries, it will be done monthly.) It is used in manual and computerised systems.

Question 22

Provide instances in which there will be risk of material misstatements

Answer 22

• The inclusion of fictitious employees on the payroll
• Illegal employment practices
• Employment benefits

Question 23

What is the occurrence (assertion) of human resources cycle?

Answer 23

The totals (account balances) recorded for salaries and wages include only amounts paid to genuine (non-fictitious) employees in respect of genuine (non-fictitious) hours worked.

Question 24

What is the completeness assertion for the human resources cycle?

Answer 24

All salaries and wages paid or payable for the period, have been included in the account balance. The risk of material misstatement arising from the omission of salaries or wage
payments is not usually anything other than low, but the auditor should be aware that payments to illegal employees may be excluded and written off through other accounts.

Question 25

What is the accuracy, cut-off and classification assertion for the human resources cycle?

Answer 25

A mounts paid for salaries and wages and other related data have been recorded appropriately, the payments have been recorded in the correct accounting period, and the amounts have been recorded in the proper accounts. The risk of material misstatement relating to these assertions is usually low. Because the use of packaged salary and wage software is widespread, the accuracy of calculating amounts owed is usually very accurate and postings to the proper accounts (e.g.
salary expense, deduction account, etc.) are appropriate. With regard to cut-off, there is a possibility that at the end of the financial year there may be amounts due to employees in respect of salaries or wages. For example, if wages are paid every two weeks and the financial year falls in the middle of that two week period, there will be a week’s wage owing at the financial year end which must be accrued

Question 26

State the analytical procedures in the human resources cycle

Answer 26

Will include:
* Comparisons*
– salaries: month to month by division, department or section
– wages: period to period by cost centre, etc.
– salaries and wages to the prior year corresponding period, and
– deductions paid over to third parties, month to month.
* Ratio and trend analysis, for example*
– salaries as a percentage of total expenses
– wages as a percentage of production costs, and
– wages in relation to production (output).
* Investigation of fluctuations and follow up of any explanations given by the client.

Question 27

Provide the procedures to confirm that employees on the payroll are not fictitious

Answer 27

Inspect the documentation in the employee’s personnel file, for example signed employment contract, identity details (identity numbers can be verified on the national identity number database), tax registration forms, etc. and agree it to the payroll.
* Perform a positive (physical) identification of the employee where possible; this would involve visiting the employee at his place of work during working hours and inspecting his personal identity document or staff identity tag.
* Enquire of senior personnel to confirm (in writing) that specified individuals are employed in their section or division.
* Inspect returns to outside entities for the inclusion of employees selected in the sample, for example PAYE reconciliations submitted to SARS, or medical aid contribution returns.
* Use audit software to scan the employee master file for “error conditions” which may indicate fictitious employees, for example:
– duplicated or missing identity numbers
– duplicated or missing tax reference numbers
– duplicated bank accounts, and
– duplicated staff employee numbers.