Page 95 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
may be able to spot payments being made to employees who
are no longer working there. This is a particular problem in
larger companies, where any delay in processing termination
paperwork can result in continuing payments to ex-employees.
It also serves as a good control over any payroll clerk who
may be trying to defraud the company by delaying termina-
tion paperwork and then pocketing the paychecks produced
in the interim.
• Compare the addresses on employee paychecks. If the payroll staff

is creating additional fake employees in the system and having
the resulting paychecks mailed to their home addresses, then a
simple comparison of addresses for all check recipients will
reveal duplicate addresses. (Note, however, that employees can
get around this problem by having checks sent to post office
boxes. To control this, institute a policy to prohibit payments
to post office boxes.)

The preceding set of recommended controls encompasses only the
most common ones. Supplement these by reviewing the process flows
used by a company to see if there is a need for additional (or fewer)
controls, depending upon how the processes are structured. Thus, these
controls should be considered only the foundation for a comprehensive
set of controls that must be tailored to each company’s specific needs.

When to Eliminate Controls

Notwithstanding the lengthy list of controls described in the last section,
it is also possible—even advisable—to remove controls. By doing so, fre-
quently you can eliminate extra clerical costs, or at least streamline the
various accounting processes. To see if a control is eligible for removal,
take the following steps:

1. Flowchart the process. Create a picture of every step in the entire
process in which a control fits by creating a flowchart. This is

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