In general, a payroll and personnel audit is an examination of systems, procedures, rules, and records related to payroll and Human Resource Management (HRM).
This examination is a strategic step to prevent some risks that can arise in the future.
One of them is fraud or cheating through the payroll system. In the event of such a case, the company not only loses money, but also harms other parties.
What is a payroll and Personnel Audit?
In this context, payroll refers to the payment of wages for the delivery of services performed by an employee. Meanwhile, personnel refers to matters related to HR. So, a payroll and personnel audit can be understood as a regular review of payroll and personnel records.
Purpose of payroll and Personnel Audit
This examination of the salary system and employees, carried out to achieve various goals. Some of them are as follows.
- Ensure all employees are properly paid
- Ensure deductions, bonus or commission payments, and accurate reports
- Ensure that information is always updated
- Ensure the company complies with payroll, employment and tax payment rules
- Avoiding fake Commission schemes
- Avoiding fictitious employees
- Uncovering potential errors and inaccuracies
- Ensure that account balances affected by the payroll and personnel cycle are reasonable and in accordance with accounting principles
Scope of payroll and Personnel Audit
In accounting, auditor. duty to check the accuracy, compliance, assess, and match the information. Auditors not only use information in the form of written documents, digital, and applications used, but also oral information from the relevant divisions (if needed).
What, then, does the payroll auditor audit? The documents and information that become audit data are employee data, payroll and distribution lists, pay slips, attendance recaps, payroll systems, and the basis of the policies adopted. Through these documents, auditors can assess and suggest improvements to the company.
Payroll and personnel Audit procedures
Examination of records related to payroll and personnel, not only requires data to be reviewed. But it also requires a team to ensure the successful review of the documents. Here are the stages of activities that can be done.
1. Planning Audit Time
The first stage is to plan the audit time. This stage includes when the audit begins, the audit period, and the estimated time required. That way, the auditor team can carry out the examination according to the scheduled time.
2. Gather A Team
The second stage, determine and assemble a team that will examine the company's reports. In this regard, the company can assemble an internal team or ask for external help. The internal team is an employee of the company, while the external team is a team of auditors from the public accounting firm (KAP).
3. Identify the parts to be audited
Once the team is assembled, the first task is to identify the parts to be audited. Payroll checks, will focus on payroll systems, tax contributions, financial ledgers, to time and attendance records.
While the personnel section will focus on Personnel Management Information Systems, preparation and development of personnel, as well as supervision and evaluation of the organization.
4. Collect the necessary documents, notes and information
The fourth stage is to collect materials for auditing in the form of necessary documents, records and relevant information. Such as, employee lists, payroll lists, time sheet data (working hours and holidays), financial ledgers, to bank account reconciliation. These materials will be the data for the inspection process.
5. Review employee Data
After that, the audit team can start checking and matching the employee data that has been collected. This review is included in the first audit process to be carried out by the auditor and his team. In this process, auditors can communicate with HR and payroll to ensure that the information obtained is correct and accurate.
6. Review payroll based on employee working hours
In the sixth stage, the audit process is the matching of salary with employee working hours. This section becomes one of the important parts to do. Because, every employee is entitled to a salary according to their working hours.
But in practice, this section also often experience buddy punching or theft of time. This phenomenon occurs when an employee absences a colleague who is actually not in, so that the colleague can get paid despite not working.
7. Checking payments beyond basic salary
Furthermore, auditors need to check payments other than basic salary. Such as overtime, bonuses, commissions, allowances, additional salaries, and tips. This examination aims to ensure that salary payments are not miscalculated and overpaid or underpaid.
Remember, excess payroll can harm the company and lack of payroll can cause conflict between the company and employees.
8. Checking special or rare salary transactions
The eighth stage is the process of reviewing other transactions outside the basic salary. Such as reimbursement of costs (reimbursementthe first time I joined, and the second time I joined, the first time I joined, and the second time I joined (relocation pay). All of these transactions, must be matched with the calculation of salaries and employee data.
Remember, this kind of transaction is vulnerable fraud. To ensure accuracy, auditors can verify with the finance and HR departments.
9. Checking tax deductions and deposits
In addition, auditing also includes tax withholding and deposit reports. This inspection process ensures, that the company deducts taxes from the employee's salary in accordance with the applicable rules and channels them to the tax authorities.
So, the auditor must also ensure that the policy reference used is the latest policy. Both policies regarding payroll and employment.
10. Excellent communication and interpersonal skills
Reconciliation is the matching of two accounts to see the difference. In this process, the matched documents are payroll records, bank records, and other supporting documents. This process ensures that there are no fictitious, double, or unauthorized payments.
11. Ensure Payroll Practices In Accordance With The Rules
Each country always has its own payroll and employment rules. At this stage, the auditor ensures that the company complies with the law and performs its duties in accordance with applicable rules.
12. Report Findings
After the document review process is complete, the auditor needs to make a report on what was found in the field. The audit report will be distributed to several related staff, such as the head of HR and finance.
13.identify improvement opportunities and suggest improvements
The audit report not only contains what the auditor found in the field, but also contains several things that can be improved. Be it a payroll system or employee management. In addition, the auditor also provides improvement suggestions for things that are likely to be improved.
Examples of payroll Audit cases and their resolution
To get a clearer understanding, here are examples of cases that can be studied. PT Maju Terus is a company engaged in the field of muslim clothing. Currently, PT Maju continues to have 150 employees divided into several divisions. Three of them are the division of Finance, HR, and administration.
When the internal audit team conducted a review, it was found that there were three names of employees who had quit, but were still recorded in transactions and payroll systems. Based on his analysis, the auditor called this an indication of a fictitious employee. This can happen, because employee data is not updated within a certain period.
So to solve this, the auditor suggested several things to the relevant division. Personnel department, re-verify the data of active employees, improve the Employee List, and distribute it to the finance department.
While the financial section, matching employee data with personnel data and stop paying salaries for fictitious employees. To improve the effectiveness of payroll and employee data collection, the auditor also suggested that Pt Maju continue to implement an integrated HR system that has periodic verification between HR and finance. That way, the name of the employee who has left will not be listed in the payroll list.
Examples of payroll audits in enterprises
From the example of the PT Maju Terus audit case above, the auditor applies several stages to assess the company's payroll report. The audit process takes place as follows.
- Collecting information - in the form of active employee data, payroll reports, payments, to employee attendance and overtime reports.
- Checking data and documents - the auditor checks all the information collected. Including re-matching and searching information from relevant departments for additional information.
- Reporting audit results - the auditor writes an audit results report that includes findings, problems, improvement opportunities, solutions and suggestions.
Conclusion
Payroll and personnel Audit is an examination and review by internal and external auditors of payroll and personnel documents. This process can measure the report's compliance with payroll and employment practices, minimize financial fraud, and company compliance with the law.
Audit process in any company, it becomes one of the important parts, because it can improve the health of the company when done correctly. In practice, however, the audit process is not as simple as existing procedures. Auditors must deal with limited time, human resources, and budget.
So, in order for the company to get the results of the audit in a certain period of time, not only funds are needed to make it happen, but also a system audit management which ensures the efficiency of the practice.
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