In meeting the control objective of safeguarding of assets, which department should be responsible for
Distribution of Paychecks
Custody of Unclaimed Paychecks
Segregating paycheck preparation from distribution makes it more difficult for fictitious employees to receive payment. In principle, the payroll function should be divided into its authorization, recording, and custody functions. Authorization of hiring, wage rates, and deductions is provided by human resources. Authorization of hours worked is provided by production. Based upon these authorizations, accounting (the payroll department) calculates and records the payroll and prepares checks. The CFO signs and distributes payroll checks. Consistent with its asset custody function, the CFO should distribute paychecks or cash in a manual system (or make electronic funds transfers in a computerized system) so as to prevent payments to fictitious employees. Furthermore, the CFO, not the payroll department, should receive unclaimed paychecks or cash for safeguarding, and incomplete EFTs should not be returned to any of the other functions.