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How To Do A Payroll Audit - Former Auditor's Expert Advice

how-to-do-a-payroll-audit-former-auditor-s-expert-advice
Webinar: ID# 1026534
Recorded On-Demand
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About This Course:
Payroll audits are increasing at both the state and federal levels. Unfortunately, many employers are simply unprepared for a payroll audit, which can occur for many reasons.

Whether from an employee making a claim of unfair pay practices, the government randomly selecting your organization, or you simply decide to review your own procedures, an audit can help find and cure problems.

Benefits Of A Payroll Audit

Generally speaking, the processing of payroll can produce errors in several places, which calls for a detailed process flow that also incorporates several controls. This procedure can be used to ensure that payroll is handled consistently on a repetitive basis.

A payroll audit offers several benefits for organizations, ensuring accuracy, compliance, and efficiency in managing payroll processes. Here are some key advantages:
  • Accuracy Verification:
    Payroll audits help verify the accuracy of payroll calculations, ensuring that employees are paid correctly for the hours they've worked, their benefits, and any other compensation owed to them. This helps prevent errors such as overpayments, underpayments, or miscalculations of taxes.
  • Compliance Assurance:
    Compliance with local, state, and federal laws and regulations regarding payroll is crucial for businesses. A payroll audit helps ensure that the organization is compliant with relevant laws such as minimum wage requirements, overtime regulations, tax withholding requirements, and reporting obligations.
  • Risk Mitigation:
    By identifying and rectifying errors or discrepancies in payroll processes, audits can help mitigate the risk of legal penalties, fines, or lawsuits resulting from non-compliance with labor laws or inaccurate payroll practices.
  • Detection of Fraudulent Activities:
    Payroll audits can uncover fraudulent activities such as ghost employees (non-existent employees added to the payroll), unauthorized changes to employee data, or falsification of hours worked. Detecting and addressing such fraudulent activities can prevent financial losses for the organization.
  • Process Improvement:
    Conducting regular payroll audits provides an opportunity to evaluate existing payroll processes and identify areas for improvement. Streamlining processes, implementing automation, or enhancing controls can help make payroll operations more efficient and cost-effective.
  • Employee Trust and Morale:
    Accurate and timely payroll processing enhances employee trust and morale. When employees are confident that they are being paid correctly and on time, it fosters a positive work environment and improves overall employee satisfaction.
  • Financial Reporting Accuracy:
    Payroll expenses are a significant component of a company's financial statements. Ensuring the accuracy of payroll data through audits contributes to the reliability of financial reporting, providing stakeholders with confidence in the organization's financial health.
  • Cost Savings:
    Identifying and rectifying errors in payroll processes can result in cost savings for the organization by reducing unnecessary expenditures on incorrect payments, penalties, or legal fees associated with non-compliance.
What You'll Learn:

Get ahead of potential trouble with this training session from Mark Schwartz, a former payroll tax auditor who will give you a proactive review of how your payroll department can catch some potential mistakes - and save your organization from fines or penalties!

This training session will teach you where to start, what to look for, common mistakes, and what you should do once you find a mistake! By attending, Mark will help you evaluate and adjust you payroll operations to minimize exposure in an audit. Among other things, you will learn:

  • The IRS' directives to auditors on what to focus on during payroll audits
  • How the IRS determines issues for your company
  • How to conduct yourself if you are audited
  • Responsible parties
  • Common areas that you can fix in advance where mistakes or issues are normally found during an audit
  • How an independent internal review can help you detect internal control issues
  • How to identify any areas of concern prior to an external audit or an audit by another group within your company
  • Where to go to for assistance so you are not re-creating the wheel
  • How to devise a game plan for what you want to review, and how to divide and conquer

...and as always, this session will be interactive, so we'll be able to answer your questions on this topic throughout the presentation!

Bottom line, payroll audits are good in that they can help fix problems before they are discovered by the government, can help re-assign tasks as needed, and can help determine if an outside source by used to provide payroll services. Act now by ordering today!

Top FAQs

A payroll audit typically occurs because either for many reasons: an employee makes a claim of unfair pay practices
Employees work directly for the company, which controls their work, pays their taxes, and often provides benefits, whereas the Independent Contractor is hired to do a specific job without the employee perks.
Among other things, an auditor helps an organization ensure that its financial records are accurate, applicable laws are followed, and taxes are paid properly and timely.
It often depends upon which factors - such as pay, tools, equipment, work hours, manner and means of performing services, etc,) the worker has control over.
An audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to verify the financial statements and non-financial disclosures. An audit can apply to an entire organization or might be specific to a function, process, or production step, and might include an on-site verification, such as inspection or examination.
A payroll audit is a review of an organization's payroll procedures. It can be done internally for assurance or by an external entity such as the government in reponse to a complaint, lack or inconsistent reporting, etc.
In addition to ensuring that employees are paid correctly and on time, "Payroll" has numerous time and reporting requirements. The primary payroll areas include paychecks, reporting, operations, and management.
Payroll is much more than just handing out paychecks, and includes a variety of responsibilities such as handling garnishments, travel pay, multi-state taxation, unclaimed paychecks, and much more in a timely and accurate fashion.
Payroll Administrators must be able to:
  • Properly "classify" workers
  • Apply the various exemptions
  • Calculate gross pay and properly make deductions
  • Correctly identify, pay, and withhold taxes for employees
  • Administer deferred compensation, cafeteria plan, sick pay, and other compensation
  • Handle stock options, expense reimbursements, relocation, and other "expenses"
  • Follow the proper policies, procedures, and documentation requirements for garnishments and levies
  • Properly complete and file all required reporting requirements
  • Correctly complete year-end requirements and establish year-beginning requirements
  • Implement and maintain fraud, audit, disaster recovery, and record retention processes and procedures
Auditors examine financial records and statements to determine the validity of information, and to check for fraud. They also ensure that individuals, companies, and government agencies are compliant with tax laws.
While many payroll-related regulations are federally-governed, there also are many state requirements, including those for handling garnishment, final paychecks, and unclaimed paychecks. Each state's requirements differ in the details, so be sure to check your state's requirements by clicking the applicable link(s) at the bottom of this page.
The company withholds income tax, Social Security, and Medicare from wages paid for employees, but none for Independent Consultants.
Definitely! An audit can be done either by an internal person or outsourced to an expert, with the expectation of fixing or updating any issues to avoid fines, penalties, etc.
Types of audits include internal, external, forensic, public, tax, and information systems. Internal auditors typically examine issues related to company business practices and risks.
In business since the mid-1990's, we have over 25 years of experience delivering high-quality training content via seminar, webinar, online, and other formats. Each of our courses are delivered by an industry expert who will share his or her years of experience to help you be in compliance, smarter, and more productive, and almost all offer SHRM and HRCI credits.
Continuing Education Credits:

Click the 'Credits' tab above for information on PHR/SPHR, PDCs, and other CE credits offered by taking this course.
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How To Do A Payroll Audit - Former Auditor's Expert Advice
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