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What is payroll internal control?

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Payroll internal control describes the steps a business takes to protect its payroll information. Payroll controls and procedures prevent employees from leaking confidential information, but also protect the business from employees who steal money through overpayments and false time records.

What is an example of payroll internal controls?

An example of payroll controls is if one employee gathers and verifies timesheets, another calculates payroll, and a third employee (typically the manager or supervisor) approves the payroll before it is processed. By separating duties, companies can ensure that no single individual can control the payroll process.

How do you audit payroll controls?

Finance teams can use the following steps to audit the payroll process:

  1. Review all employees on your payroll and make sure all employees worked for the business during the relevant time period.
  2. Analyze the numbers and examine each employee’s pay rate to verify the worker is paid the correct amount.
  3. Check that time off is correctly labeled and that employees correctly record when they clock in and out.
  4. Compare findings to other records including the business’s general ledger to verify the totals match.
  5. Confirm tax withholdings, remittance, and reports are accurate and that finance teams withheld the right tax amounts for each employee.


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