Audit and Accounting > Payroll

Payroll is one of the traditional audit areas applicable to most organisations and an excellent area to use IDEA. The main objective is validity and tests of existence of employee and correctness of pay are usually predominant. There are many regulations and taxes associated with payroll and compliance with these can be checked.

The following are commonly used tests (grouped by type).

Analysis

  • Summarise/Stratify salaries by department/grade, etc.
  • Profile employee ages/years of service to assist in forward planning
  • Advise allowances by type
  • Analyse costs for special pay, overtime, premiums, etc.
  • Summarise payroll distribution for reconciliation to general ledger
  • Summarise and compare costs for special pay, overtime, premium, etc.
  • Create custom payroll reports
  • Sort employee by name, address and store to identify conflicts-of-interest where managers have relatives working for them

Calculations

  • Cast (total) gross pay, net pay, deductions and any other value fields
  • Calculation of gross pay
  • Calculation of net pay

Exception Tests

  • Extract all payroll checks where the gross amount exceeds set amount
  • Reasonableness of Tax code, Pay/grade comparison, Hours worked, Overtime claimed, Sickness taken, Holiday taken, Date of birth (over 16, under 65)
  • Identify bonuses and other allowances
  • Isolate entries against authorisation records for new or terminated employees
  • Report activity on records for new or terminated employees
  • Find changes in key payroll data, such as gross pay, hourly rates, salary amounts, exemptions, etc.
  • Identify and records with missing information (National Insurance number/Social Security number, tax code, employee number, etc.)

Gaps and Duplicates

  • Duplicate employees (Social Insurance, National Insurance, Social Security numbers, Employee numbers) on payroll file
  • Duplicate bank account details
  • Duplicate names and date of birth

Matching and Comparing

  • Comparison of payroll file at two dates to determine recorded starters and leavers (hires and terminations), changes in pay, etc. are as expected
  • Join payroll transactions file, to payroll master to determine if there are “ghost” employees on the payroll
  • Compare time-card entries and pay to payroll and indicate variances
  • Compare vendor addresses/phone numbers and employee addresses/phone numbers to identify conflict-of-interest (e.g., postcodes, phone numbers)

Sampling

Most sampling options apply