Page 92 - Essentials of Payroll: Management and Accounting

Payr oll Pr ocedur es and Contr ols
retrieve bank records online through the Internet, a reconcili-
ation can be conducted every day. This is a useful approach,
since irregularities can be spotted and corrected much more
quickly.
• Review uncashed checks. If checks have not been cashed, it is
possible that they were created through some flaw in the pay-
roll system that sent a check to a nonexistent employee. An
attempt should be made to contact these employees to see if
there is a problem.
• Update signature cards. A company’s bank will have on file a
list of check signatories that it has authorized to sign checks.
If one of these people leaves the company for any reason, he
or she still has the ability to sign company checks. To void this
control problem, the bank’s signature card should be updated
as soon as a check signer leaves the company.

Payroll Expenses

The controls used for payroll cover two areas: the avoidance of excessive
amounts of pay to employees, and the avoidance of fraud related to the
creation of paychecks for nonexistent employees. Both types of controls
are addressed here.
• Verify hours worked. Employees may pad their time sheets
with extra hours, hoping to be paid for these amounts. Alter-
natively, they may have fellow employees clock them in and
out on days that they do not work. These actions can be diffi-
cult to spot, especially when there are many employees for a
supervisor to track or if employees work in outlying locations.
Supervisors should review and initial all time sheets to ensure
that the hours claimed have been worked, though they may
not remember what hours were worked several days earlier
in the reporting period. As noted in Chapter 2, an automated
time clock can be used to block out the hours when an
employee is allowed to clock in or out and to quickly create

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