Payroll Auditing Techniques



Payroll Auditing TechniquesLisa Poole, CPPVP, HR Operations, PayrollSunTrust BankAgendaSelf AuditSamplingReview self audit and payroll cycle programsItems to consider auditingPeriodic practicesRisk mitigationConducting a Self AuditAuditing one complete cycleFunctions of the departmentDocuments reviewedRisks associated with control weaknessInternal controls neededConsiderationsWhat audit procedures would you recommend obtaining evidence that payroll data are accurately totaled and free from defects? What “items” would you sample? What factors should be considered in setting the size of your sample?Purpose of Audit SamplingSampling is performed because it is more efficient than testing 100% of a population. In tax audits, if the taxpayer and the Department can agree on a representative sample, it can save both parties time and money. Sampling RiskRisk is made up of the risk of inaccurate records and the risk of misapplication of the law Sampling risk is the chance that the sample selected is not representative of the population Risk that there are errors (inherent risk)Risk that procedures will not find errors (audit risk)When Not to SampleSmall population (test 100% of the transactions or dollars in this case)Large dollar amounts – verify that amounts reported/paid match source documentsDefining a Test SampleDefine the objectives of the testSample result should be objective and defensibleDefining a PopulationDecide what period will be covered by the testDefine the sampling unitConsider the completeness of the populationConsider how the error rate will be measuredSelection of the Sample Random number samplingSystematic samplingOther samplingDetermine the sample sizePerform the sampleEvaluate the Sample ResultsInterpret resultsReach an overall conclusion about the populationCompliance TestsCompliance tests are tests which determine whether controls are being complied withYes – controls are being followedNo – deficiencies in controlsProcedural QuestionsWhat audit procedures would you recommend to obtain evidence that the pay rates are appropriately assigned and used in figuring gross pay? Review of Self Audit ProgramReview of Payroll Audit ProgramSample listing of auditsItems to Consider AuditingSSN – SSNVS/BSOI-9 FormsGarnishmentsTax deposits Benefit plan itemsUnclaimed wagesEmployee data changesTax rates Employee tax set up – reciprocity rulesReconciliationsInterface data transfersChecks to inactive employeesPeriodic PracticesData scrubbing – check for data exceptions such as:Exempt W-4 and state withholding forms for complianceCost center changesPay and deduction code usageRetroactive increases and decreasesSource DocumentsTime recordsPayroll registerGeneral ledger balancesWage and tax registersW-2 formsPayroll check clearing accountRisk MitigationSegregation of dutiesTimely account reconciliationsManual check approvalsReview negative liability account balancesJob rotationSecurity of data – storage, passwords, confidentiality agreementStandardized checklists – new dept set up, W-2 corrections, approval authorityQuestions? Contact Me!Lisa Poole, CPPpoolarita@404-813-7847 ................
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