Any payroll professional can make a mistake. These problems usually reveal themselves in time. However, intentional payroll discrepancies are usually not simple mistakes but acts of deception. Following are some red flags auditors look for in your organization's payroll procedures.
Red Flag #1 — Payroll Procedure Manipulation
Even with the best laid plans, payroll procedures can be manipulated. Does your organization use write-in timesheets? Watch for inaccurate data found on write-in timesheets. When reviewing payroll input data, have you noticed any employees who complete the timesheet by always beginning work at exactly 8:00 AM and leaving at exactly 5:00 PM. This lack of accurate timekeeping makes it possible for an employee on paid leave, to be paid for working an eight hour day plus overtime hours.
Red Flag #2 — Little Personal Information
Another situation worth investigating is when very little personal information is available about a particular employee or when that employee has a post-office-box home address. In addition, their paychecks may reflect few or no payroll deductions. This may indicate a fake employee. These pseudo-employees can be issued several checks prior to being discovered.
Red Flag #3 — One Bank Account Number/Two Employees
The procedure of direct deposits can make payroll processing easier; however, it may also lend itself to easier cover-ups. One such problem may be revealed if the same bank account number is used for two different employees. Check to ensure you really have two employees using the same bank account. Otherwise, you may have one employee and another pseudo-employee on payroll.
