How do we manage payroll, keep track, and ensure that our payroll meets the set standards as HR professionals? The answer is the periodic payroll audit. The periodic audit starts from monthly, quarterly to yearly. Payroll involves regular updates & I would recommend monthly audit as a measure of efficiency and effectiveness.
Payroll audit is an examination of payroll processes for assurance and accuracy.
Below is a simple procedure of how to conduct an HR Audit.
1. Determine when to conduct the audit and communicate in advance. Remember you might need some confidential information that is not within your reach.
2. Check on payroll management policy and procedure, if outsourced, check the service level agreement or the terms of reference. Use these to create a checklist on areas of concern.
3. Run reports on basic employee data. Ghost employees might be there!
4. Sample the employees to confirm their payroll details in full. How do you do sampling?
5. Generate full payroll list including all employee, their incomes, expenses, deductions, and net pay.
6. Employ verification techniques on related calculations such as tax charged vs gross amount or tax charged vs net pay, NHIF deduction vs gross amount
7. Compare the difference in amounts paid in the current month vs previous month. The difference should be supported by proper documentation.
8. Confirm authorizations and bank submissions.
9. Compare the budget payroll cost vs the actual cost.
10. Compile your report giving recommendations & conclusion
The audit can be done by internal employees or by an external consultant of your choice. Confidentiality is key for the auditor you are choosing. Implementation of Non-Disclosure Agreement is applauded.
Gift me a comment or like. Thank you in advance.
NB: This is a piece of basic information from my opinions that you can build on & not gospel truth.
Nelson Ogudha
HRIS specialist | Data Analytics | Reporting Expert | CPA II | CHRP