Currently, most employee benefit costs and compensation are some of the major expenses incurred by most companies. As a result, companies tend to implement various departments in their institutions to deal with the payroll transaction processes. One of those departments is the human resource division that undergoes an auditing process. Thus, it is essential for any institution to understand how human resource management occurs, the transactions in the process, the type of records and documents used in the payroll process, and the functions of the administration. Once this is done, it will be easier for the management to identify the control risks in the process and familiarize themselves with the auditing process’s substantive procedures. In the end, the management will be able to evaluate the audit findings and reach a valid conclusion on payroll expenses.

In any organization, the human resource process commences with the establishment of sound strategies for recruiting, training, evaluating, promotion and compensation for staff members. Ones employees are hired, they are expected to perform their roles diligently so as to receive their payroll. The payroll transaction commences when a staff performs his duties and the time spent on the work is recorded on a timesheet or a timecard. The timesheet is later on approved by the employee’s supervisor before being forwarded to the payroll department. The payroll information is later reviewed and sent to the IT section where processing takes place before full payment is made. During this entire process two types of transactions takes place. First, payment is made to workers for the services rendered. The accounts affected when such a transaction takes place are the cash, inventory, and indirect and direct labour expenses accounts. On the other hand, the other transaction that takes place is the accrued payroll liability. Here cash and pension costs accounts are affected.

During the payroll application and transaction process, various documents and records are used. Such documents and records comprises of the payroll check, the payroll register and the payroll master file. The payroll check consist of records that show the amount of money paid to a staff for the services offered. While the payroll register acts as a document that indicates a staff’s deductions, gross pay and net pay. On the other hand, the payroll master file is a computer based file that maintains all the company’s records related to issues of the employees’ salaries. Some of these records may contain information on the staff’s name, pay rate and social security number. It is usually the function of the human resource management to ensure that the payroll costs are for genuine company activities, and that the employees are paid according to the services rendered.

Once the payroll transaction takes place it is important for the management to settle control risk for the human resource management process. In most occasions, the control risk is set by the company’s auditors. They do so by conducting a thorough investigation of the company’s audit system where they tend to gather evidence from various transactions made in the firm. The auditors then scrutinize the evidence obtained and later set and document their findings in the form of a memorandum or a flowchart that indicates the complete conclusion about the control risk. Once the auditors access the control risks in the human resource management process, they are then able to identify payroll expenses accounts that may be misstated. Moreover, they also familiarize themselves with the substantial tests used for examining the reasonableness of payroll expenses and accrued accounts. In the end, ones the auditors have identified the misstated payroll accounts, they are expected to analyze the misstated accounts and perform an additional auditing procedure. Such an action will help them reach a valid conclusion on payroll expenses.

In conclusion, the human resource management process involves hiring, training, promoting and reimbursing employees of the work done. In most occasions employees tend to be paid in accordance to the work done. During this transaction process, various documents and records such as the payroll check and payroll master files are used to record the employee’s name and the amount paid as salary. Once the workers are paid, then the auditors are expected to assess the control risks experienced during the entire payroll process. Here, they end up conducting research and gathering valuable information, which they end up documenting it in form of a memorandum or flowchart. The documented information helps the management as well as the auditors to identify any misstated account and correct it as soon as possible.