Question

In Cihan University, the payroll department is in-charge of hiring employees, timekeeping, preparing the payroll and paying the payroll.

In not less than 500 words, write a report advising the University on the implication of allowing the payroll department to handle these four jobs and way forward.

Answer 1

A report advising Cihan University on the implications of allowing the payroll department to handle hiring, timekeeping , preparing and paying payroll processes.

To

The Administrator

Cihan University ,

Sub: A report on the implications of allowing the payroll department to handle hiring, timekeeping , preparing and paying payroll processes.

Dear Sir/Madam,

Kindly refer below the implications of the additional duties proposed for Payroll department on the internal control aspects of the University as detailed in the report. The Payroll department essentially performs the work of generating the payroll and maintaing data reagrding employee details and benefits of employees.

The additional duties proposed for Payroll department may significantly impact the concept of segregation of duties which is very vital part of internal control in the crucial payroll management process.

1. Hiring Process: For hiriing there must be a separate department who has specialized skillset for hiring. This is a very confidential department who handle the hirirng process in co-ordination with higher management to recruit the correct HR talent. If payroll people are doing this, the efficiency of the process may go down. Due to the lack of segregation of duties , there is a chance of nexus and fraudulent recruitments and false payroll as employee master data can be easily manipulated. This will impact the business ethically and financially.

2. Time keeping is another job that should be performed by a separated set of people having no relation with recruitment, payroll or payment processing. This is again a sensitive job and if the payroll staff do this job , same risk of negligence and farud and collusion may arise. This will also have negative financial an internal contriol impact.

3. Payroll generation : This is the only fucntion that payroll department should perform and it should be segregated from Recruiting, timekeeping and payment functions.

4. Payment of Payroll: The payroll report must be handed to the Treasurry or Accounts Payable team for executing the payment.Again from segregation of duties aspect , the payment should not be executed by Payroll staff to avoid the dangers of possible fraud and collusion .

Based on the above possible impacts on the internal control aspects that may severely impact the performance of the University, it is therefore suggested not to allow payroll department to handle recruitment, timekeeping and payment of payroll and let them focus only on generation of payroll .

Will be glad to answer any question from you in this context.

Best Regards

On Behalf of

XYZ Consultants