In this episode, we discuss the controls associated with payroll. This is an area in which fraud is more likely to occur because of such activities as buddy punching and the use of ghost employees, so controls are unusually necessary. Key points made in the podcast are noted within the following general classifications:

Manual System Controls

Verify that all time cards have been received from employees by matching them to the employee list
Verify all hours worked, and especially overtime, with supervisors
Gain proper approval for all pay rate changes
Have a second person verify all payroll calculations
Have recipients sign for their paychecks, to ensure that payments are not going to ghost employees
Compare cashed paychecks to the list of distributed checks, to see if additional checks were issued
Compare the addresses on employee checks, to see if more than one check is going to the same address
Look for double endorsements on checks, which are an indicator of ghost employee arrangements

Cash Payment Controls

Have recipients sign for the amount of cash issued to them
Use a bill and coin requisition form, with approvals, to request the cash to be used for payments to employees

Computerized System Controls

Use a smart time clock to eliminate the need for manual approvals
Have supervisors manually override the smart clock to allow overtime selectively
Install biometric clocks to eliminate buddy punching
Install a surveillance camera over the time clock to foil buddy punchers
Review the payroll register for errors
Use variance reports to detect incorrect payments
Review self-service entries by employees and managers for errors
Install limit checks on self-service screens to control the date entry process
Email all payroll changes made back to the people requesting changes, to ensure that the changes match their intentions
Install extra controls over direct deposit change transactions
Do not use deposit slips for direct deposit information (use a cancelled check instead)
Look for duplicate pay-to bank accounts, which can indicate ghost employee transactions
Limit access to the employee master file, and keep a log of changes to it
Compare the company phone list to the payroll register, to see if anyone was excluded from a payroll, or if ghost employee payments are being made