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It is very important to establish adequate controls in the payroll process. Further, it is also important to know that the controls established are working adequately. For example, whether an employee is entitled to a specific location allowance, whether a head-count analysis is done on month-on-month basis matches, whether different employees have the same bank account number for salary credit. The payroll tests are generally focussed on the ELIGIBILITY, ACCURACY and CONSISTENCY of payment of allowances and credit of deductions.



1. Summarize and stratify salaries by department/grade/age etc
2. Profile employee ages/year of service to assist in forward planning
3. Analyse costs for special pay, overtime, premiums etc
4. Summarize payroll distribution for reconciliation to a general ledger
5. Extract all payroll checks whether the gross amount exceeds the set amount.

Data Analysis In Internal Audit - Payroll


1. Check the calculation of gross pay and net pay
2. Check reasonableness of hours worked, overtime claimed, sick leave taken and tax rates
3. Review of date of birth (below 18 years and above 60 years)
4. Calculation of bonus and other allowance
5. Changes in the key payroll data such as gross pay, hourly rates, salary amount, exemptions etc.
6. Identification of missing information like GST number, PAN number, address, phone number etc.
7. Review of duplicates like duplicate bank account details, duplicate names and date of birth etc.


Comparison and matching

1. Comparison of payroll file and two different dates to determine the recorded new recruiters and terminated employees
2. Join the payroll monthly file to payroll master to determine if there are any "Ghost" employees in the payroll
3. Compare the attendance with the payroll and indicate variances (if any)
4. Compare the vendor/customer address and phone number with employee address and phone number to identify a conflict of interest


Fraud test in payroll

1. Employees having the same first name, last name and bank account number
2. Payments to employees after they have left the entity
3. Overtime payment to employees when normal hours have been worked
4. Payments made to employees who are not entitled
5. Payment of allowances when the entitlement is only once during month/ quarter/ year etc.

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Category Audit, Other Articles by - CA Amrita Chattopadhyay