![]() Have one person prepare the payroll, another authorize it, and another create payments, thereby reducing the risk of fraud unless multiple people collude in doing so. This precaution is not just to keep someone from accessing the records of another employee, but also to prevent unauthorized changes to records (such as a pay rate). Use password protection if these records are stored on line. Lock up employee files and payroll records at all times when they are not in use, to prevent unauthorized access. They may identify payments being made to employees who no longer work for the company. Send a list of payments to employees to each department supervisor, with a request to review it for correct payment amounts and unfamiliar names. Look for fluctuations in payroll-related expenses in the financial statements, and then investigate the reasons for the fluctuations. The payroll manager or a third party not involved in payroll activities should run and review these reports. These may not all indicate certain errors, but the probability of underlying errors is higher for the reported items. Some types of payroll errors can be spotted by running reports that only show items that fall outside of the normal distribution of payroll results. This log will track all changes made to the payroll system, which is very useful for tracking down erroneous or fraudulent entries. If you are processing payroll in-house with a computerized payroll module, activate the change tracking log and make sure that access to it is only available through a password-protected interface. ![]() ![]() The same control applies for any pay rate changes requested by a manager. ![]() Otherwise, there is no proof that the employee wanted a change to be made. Only allow a change to an employee’s marital status or deductions if the employee has submitted a written and signed request for the company to do so. Have either internal auditors or external auditors conduct a periodic audit of the payroll function to verify whether payroll payments are being calculated correctly, employees being paid are still working for the company, time records are being accumulated properly, and so forth. Consider using a selection of the following controls for nearly all payroll systems, irrespective of how timekeeping information is accumulated or how employees are paid.
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