Lecture notes Auditing (Audit) (payroll and personnel cycle )
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Course
Auditing (AUDIT)
Institution
Business Management Training College (BMTcollege)
Salaries and wages are an integral part of any manufacturing concern, and more so for those companies that provide a service. Often overlooked the payroll and personnel function could be said to be even more important than the cycles described in the previous units. Happy staff normally result in t...
Introduction
Salaries and wages are an integral part of any manufacturing concern, and more so for those
companies that provide a service. Often overlooked the payroll and personnel function
could be said to be even more important than the cycles described in the previous units.
Happy staff normally result in the work being done efficiently and effectively, in addition
staff loyalty is often stronger in companies where staff are looked after compared to those
where staff are treated as just another number.
4.2 Accounting system and control activities
Salaries and wages are an integral part of any manufacturing concern, and more so for those
companies that provide a service. The broad difference between salaries and wages can be
described as follows:
Salaries: these employees normally sign a formal employment contract. They are classified
as permanent staff and are paid on a monthly basis. Salaried staff normally don’t get paid
for working overtime. These staff normally receive their salary as a deposit into their bank
account by the company
Wages: these employees are normally required for certain stages within the production
process. For example, extra staff may be required by farmers during harvest time, while
their services are not required once the harvesting has been done. They are paid on a
weekly basis and are normally paid for overtime worked. They could be required to submit
weekly timesheets on which their wages are based. Wage earners will normally receive their
pay in the form of cash each week.
There are many different salaries and wage systems available. Even though there are a few
off the shelf systems available, for example VIP Pastel, they will still need to be customised
to meet each individual company’s requirements.
Even though each company is different they all have the following broad functions:
Human resources: the company could have its own department or this function could be
outsourced to an external party. This department / function’s purpose is to look after the
functions that follow
Timekeeping: there needs to be a system for accurately recording the hours worked by staff.
For example, having a clock that records when staff arrive and leave
Payroll preparation: a calculation needs to be performed to determine how much staff will
be paid. There also needs to be supporting documentation that backs up the calculation.
, Payment of salaries and wages: the physical payment of money in cash or into the
employees accounts
Payroll deductions: the deduction of PAYE, Medical aid, Pension from the salaries and wages
calculated. This money is then on-paid to SARS, the relevant medical aid or pension fund.
(Adams, et al., 2019)
Documents used in the cycle
The following documents are used in the payroll and personnel cycle:
Employee file: this is normally a physical file that contains the permanent information of the
employee, such as:
Employment contract
Copy of the employee’s ID
Doctors sick notes if the employee has been off sick
Etc.
Payroll amendment form: this form will be used to make out of cycle alterations to an
employee’s monthly payroll
Staff listing: a list of all employed staff
Time card: used by wage earners to record the number of hours worked
Tax tables: used by the human resources department to calculate how much tax to deduct
from the amount paid to the employee
Payslip: summary of how the amount received by the employee is made up
Unclaimed wage register: a list of wages that have not been received (or claimed) by the
wage earner. For example, if wages are distributed on a Friday and a wage earner is sick on
this day and is unable to collect their wages, the wage cheque is recorded in the register and
when the wage earner comes to claim it they need to sign as proof of receipt.
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