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COSO - Integrated Internal Control Framework
COSO CONTROL COMPONENT: CONTROL ACTIVITIES
COSO CONTROL OBJECTIVE: OPERATIONS - Payroll - Calculating Wages & Salaries.
COSO ORGANIZATION LEVEL OF RESPONSIBILITY: BUSINESS UNITS AND ACTIVITY LEVEL

Control Objectives:
1) Ensure that wages and salaries should not be paid to individuals who are not employees.
2) Ensure that salaries are calculated/prepared in an appropriate manner.
3) Ensure that employee paid only for the time they have worked.
3) Ensure that payment should not be made for undone work and should be properly authorized.
5) Ensure Salaries & Wages are recorded in relevant accounting period.
6) Ensure that taxation and other deductions from salary should be calculated correctly.
7) Ensure that voluntary deduction should only be made with the consent of the employees i.e. provident Fund, etc.
8) Ensure that gross pay, deductions and net pay should be properly and accurately recorded in the accounts.

Control Level of Control

COSO Principle # CONTROL ACTIVITIES
Objective Ref. Responsibility Classification

Segregation of duties will be established and approved by

1.1
the payroll management.

Preventive Individual who prepare salary should be separate from

1.2 Activity Level 10
Controls individual who disburse the salary.

The gross pay for each individual employee should be

1.3
authorized by Payroll manager.
 Control Level of Control
COSO Principle # CONTROL ACTIVITIES
Objective Ref. Responsibility Classification

Each individual employee personnel files are kept by the

2.1
Humana Resource Department.

Each individual employee personnel files must contain the

Preventive complete details of each employee along with his gross
2.2 Activity Level 10
Controls salary and other fringe benefits.

Each individual employee personnel files will be updated

2.3
annually and will be approved by the HR Head.

Every employee will prepare time sheet and get it

3.1
approved by the departmental manager.

Approved time sheets will be submitted to the Human

3.2
Resource Department.

After reviewing the time sheets Human resource

3.3
department will forward it to the Payroll department.

The detailed payroll records show all pertinent data

Preventive describing the payroll (including total compensation,
Activity Level 10
Controls related income taxes, and other withholdings) and the
related balances are reconciled, in a timely manner, to
3.4 corresponding general ledger accounts or entries by
persons who do not have unrestricted access to cash. All
reconciling items are investigated and cleared on a timely
basis.

Payroll department will account for the salary as per the

3.5 time sheet. Alternatively, a clock card system might be
operated.
 Control Level of Control
COSO Principle # CONTROL ACTIVITIES
Objective Ref. Responsibility Classification

Payroll manager should check the total payroll cost on

Preventive monthly basis and make sure that the cost does not
4.1
Control appear excessive.

Activity Level Monitoring 10 Payroll manager make sure that in computerized payroll
4.2
Control system, there has to be production of exceptions reports.

Preventive Every payment of Bonus must be approved by the Human

4.3 Resource Department/Head of concerned department.
Control

To ensure complete and consistent recording in the

Preventive appropriate accounting period, Payroll transactions at,
5.1 before, or after the end of an accounting period are
Control
Activity Level 10 scrutinized and/or reconciled.

Monitoring Compliance with the payroll disbursement processing

5.2
Control schedule is monitored by management.

In computerized payroll system, there must be proper

Preventive command for appropriate deduction using up to date rate
6.1
Control of taxes.

Preventive Payroll department will also take due credit of any tax
6.2
Control credit available to the employee.
Activity Level 10
Preventive Payroll manager will approve the tax calculation and other
6.3
Control deductions.
 Activity Level 10
Control Level of Control
COSO Principle # CONTROL ACTIVITIES
Objective Ref. Responsibility Classification

Preventive Finance department will submit the taxes amount to the

6.4
Control Government treasury.

Preventive Every employee should be given a right for voluntary

7.1
Control deduction by the Human resource department.

Preventive Payroll manager will check the total amount of deductions

7.2
Activity Level Control 10 on monthly basis.

All voluntary deductions must be authorized in writing by

Preventive each employee and this authorization will be kept in
7.3
Control personnel file.

Preventive The accounts will be prepared from payroll data that has
8.1
Control been approved by payroll manager.

Preventive Accounting for payroll should be completed within a stick

8.2
Activity Level Control 10 timescale.

There should be control accounts for payroll, with regular

Preventive reconciliations between control totals and the payroll
8.3
Control records of all individual employees.

Name and Title of Department Director (please print)

Signature of Department Director

Date of Department Director's Signature