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Strategic Planning in the Payroll Department

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Planning for the audit must be done in secret away from the payroll department or the payroll manager’s office. Even your payroll staff cannot be in on it because it is possible that a payroll staff member is in on the scheme. The individuals conducting the audit should not be known to the staff or seen by them prior to the audit.

The net check direct deposits are cancelled for the phantom employee audit. It is common for a phantom employee to be set up on direct deposit to prevent someone from seeing another employee pocket the check envelope. If, however, canceling the direct deposits for your payroll would cause excessive harm to your employees, there is an alternative. It is common for employers to have employees who travel extensively, and canceling a direct deposit without notice may cause the employee to be stranded without funds.

To avoid this, the pause in the direct deposit system can be announced as a “system update” or “problem” that can only be handled by canceling the direct deposits for one payroll. The word audit is never used and no one should be aware of the audit being conducted. This is especially true if the notice is given well in advance of the pause date. Payroll managers should be on alert for any employees who quit or are terminated between when the deposit pause is announced and the audit begins.

Do not include the payroll manager on any audit team since these teams also should monitor the payroll manager’s access to the payroll system once the decision is made to conduct an audit. Access to terminating employees or adjusting any payroll master file records should be curtailed or denied during the planning stage. If not possible, the audit team should scrutinize all transactions the payroll manager makes within the system.

The results of the audit should be in the form of a written report to management and the payroll manager.