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Payroll Audit Template I

The document outlines the scope of a payroll audit that will be conducted on-site. The audit will include reviewing the payroll process, timekeeping procedures, wage and hour compliance, deductions, personnel files, and investigating any employee allegations of under or overpayment. It will also analyze the chain of control over payroll, payroll fraud prevention, expense reports, time docking policies, payroll tax returns, deductions, pay changes, leave of absence tracking, and compliance with laws such as the Fair Labor Standards Act. The goal is to gather information on the payroll system, identify any issues or areas of noncompliance, and provide solutions to prevent future problems.

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Jennifer Scott
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1K views2 pages

Payroll Audit Template I

The document outlines the scope of a payroll audit that will be conducted on-site. The audit will include reviewing the payroll process, timekeeping procedures, wage and hour compliance, deductions, personnel files, and investigating any employee allegations of under or overpayment. It will also analyze the chain of control over payroll, payroll fraud prevention, expense reports, time docking policies, payroll tax returns, deductions, pay changes, leave of absence tracking, and compliance with laws such as the Fair Labor Standards Act. The goal is to gather information on the payroll system, identify any issues or areas of noncompliance, and provide solutions to prevent future problems.

Uploaded by

Jennifer Scott
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Payroll Audit/Investigation and Personnel File Review (on-site audit)

Information gathering only.

The payroll audit will include an overview of the payroll process:


 What is the payroll workweek, pay times, fiscal year.
 How timesheets are completed and approved (clocking in/out procedures/controls) for different
departments
o Missed or incorrect punches
o Incorrect timekeeping procedures handled as performance issues
o Excessive corrections or adjustments for late submissions
 Wage/hour compliance (overtime, meal periods, complete time cards)
 Spot check time sheets against payroll records
 Ensure no comp time practices (illegal in CA)
 Deductions – are you taking deductions? Must be legal, pre-arranged. Cannot take vacation
make up from final wages.
 Payroll related forms and policies, such as the meal period waiver, attendance policy, time off
with pay, make up time, etc. – request all payroll related forms & policies
 Personnel file review (pull 3-5 random files and verify against checklist)
 Investigate any employee allegations: under and over paying hours (i.e. determine if employees
are being paid more or less than the actual hours worked). Determine if timecard fraud occurred
and offer solutions to prevent timecard fraud. Interview employees and supervisors.
 Verify employee status change or personnel action form process against payroll transactions

Also included but not stated above:


 Chain of control – who can make changes to payroll
o Ensure that duties are assigned so that no one person is in a position to perpetrate and
cancel/hide errors/irregularities in the normal course of their duties.
 Mangers/HR create pay changes and status changes – all must be approved
 Payroll only administers these docs, can make no changes on its own
 Verify no diversions of funds
o Who verifies payroll?
o Who has access to the data?
 Section 125 - pretax
 Make up or Comp time practices
 Payroll fraud – who enters data for payroll employees, who audits change reports, who can
create employees? Flag employees with no withholding, employees who change exemptions
frequently, one SSN used by two people, two checks in a pay period, checks going to the same
address, checks going to PO Box.
 Expense reports (reimbursed in payroll)
 How do you handle partial day docking, full day docking? Do you have policies?
 Exempt absences –charged to leave banks for 4 hrs or more in a day, no partial day deductions
 Employee verification – employees on payroll are real/active and that terms do not remain on
the payroll.
o People who come and go – how is this handled – Seasonals? Others?
 How are you paying holiday pay – double time for people who work it
 What is the formula for accrual of sick/vacation – 1-5 yrs, etc.
 Consistency of accrual on vacation/paid time off/paid leave, must be consistent

Additional items
 Payroll tax returns
 Deductions audit (e.g., 401k deductions, garnishments, employee-portion of premiums, exempt
pay deductions). Trace sample deductions to original documentation. Ensure employee
authorizations for deductions on file.
 Internal equity (requires a report reflecting the jobs, years of service and rate of pay)
 W-2’s
 Payroll changes (pay increases, etc.) – compare to source documents
 Direct deposit process/forms
 LOA tracking/process
 FLSA – misclassifying employees as exempt
 Overall payroll fluctuations
 I9 process and social verification
 SSN verification/kickbacks
 Absence reporting/processing
 Verify amounts taken for pension contribution match employee form and what was sent to
vendor
 Verify disability leave policy/pay/coordination – do you accrue during leave

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