An owner of a growing business hires you as a consultant. He is concerned about

Question

An owner of a growing business hires you as a consultant. He is concerned about rising payroll costs, and also concerned about payroll fraud. Currently, his payroll clerk collects time sheets and computes gross pay and deductions. The payroll clerk also adds new employees to the payroll system and makes all changes to employees' withholdings and voluntary deductions. Once the payroll is processes, the payroll clerk signs and distributes the payroll checks.

2. Discuss a set of recommendations that you would provide to the business owner to strengthen the owner's control over payroll procedures

Explanation / Answer

1. Make HR responsible for sending the Name of employees to Payroll dept. Thsi will avoid Ghost employees in Payroll
2. Once payroll is ready, it should be sent back to HR for verification & correct no fo days, Overtime, allowances etc so that there is no excess payaments
3. Make Payroll checks countersigned by Company Authorised signatory so that there are Two signatures on checks..One of Payroll clerk and other of Auth signatory
Above steps will ensure verifcation of Payroll data from HR and secondly all Paychecks will be signed by AUth signatory.
Thus Payroll clerk will not be able to fudge data or issue checks on his own

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