Metrics (Payroll) and the Risk Assessment Suite, Part 1 (#26)

In this episode, we give an overview of the risk assessment suite, and also describe the most useful metrics for the payroll function. Key points discussed relating to the risk assessment suite are:

  • The cost of audits for a public company can be three times the cost of audits of privately-held companies.

  • There is a disparity between the need for higher levels of assurance arising from audits and the pressure on auditors to keep their prices down.

  • The risk assessment suite revises auditing standards to make audits more comprehensive.

  • As a result of the risk assessment suite, audit planning will likely start sooner, so audits will also start sooner, and auditors will be more inclined to finish all audit work while still in the field.

Key points discussed related to metrics for payroll are:

  • Use the number of manual paychecks cut per 1,000 payees

  • Use the number of W-2c forms issued per 1,000 payees

  • Use an error summarization system to self-report payroll errors, and then issue an aggregated report by error type.

  • Use payroll outsourcing costs by month, divided by the number of payees; track on a trend line.

  • Use the total payroll department cost divided by the total number of payees; track on a trend line.

  • Use the number of W-2 forms downloaded by employees, divided by the total number of payees; useful when posting W-2 forms on a central site, where employees can readily access them.

Related Courses

Business Ratios Guidebook
How to Conduct an Audit Engagement
Payroll Management