Why Auditing the Payroll Cycle is Important

You don’t hear a lot about large-scale financial statement frauds involving payroll accounts, as accrued payroll liabilities aren’t typically material to a company’s financial position. But fraud involving the payroll cycle is quite common. Here are 6 examples of payroll fraud: • Paying fictitious employees • Paying terminated employees • Overpaying actual employees • Incorrectly classifying labor costs • Underpaying third parties • Inaccurate disclosures for executive and/or shared-based compensation To reduce the likelihood of fraud, companies should ensure that: • Payment is made to actual employees at authorized rates for actual time worked • Gross pay, payroll deductions, and net pay have been correctly calculated • Payroll deductions have been authorized • Payroll costs are correctly classified • Withholdings are submitted to third parties in a timely manner • Full disclosure is made for any executive and/or share-based compensation 0:00 Introduction 0:29 Paying fictitious employees 1:11 Paying terminated employees 1:49 Overpaying actual employees 2:25 Incorrect classification of labor costs 2:58 Underpaying third parties 3:39 Inaccurate disclosures 4:15 What companies need to ensure 6:26 The 6 steps for auditing the payroll cycle — Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world. — SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS: • A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING • A 44-PAGE GUIDE TO U.S. TAXATION • A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS • MANY MORE FREE PDF GUIDES AND SPREADSHEETS http://eepurl.com/dIaa5z — SUPPORT EDSPIRA ON PATREON *  / prof_mclaughlin   — GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT https://edspira.thinkific.com — LISTEN TO THE SCHEME PODCAST Apple Podcasts: https://podcasts.apple.com/us/podcast... Spotify: https://open.spotify.com/show/4WaNTqV... Website: https://www.edspira.com/podcast-2/ — GET TAX TIPS ON TIKTOK   / prof_mclaughlin   — ACCESS INDEX OF VIDEOS https://www.edspira.com/index — CONNECT WITH EDSPIRA Facebook:   / edspira   Instagram:   / edspiradotcom   LinkedIn:   / edspira   — CONNECT WITH MICHAEL Twitter:   / prof_mclaughlin   LinkedIn:   / prof-michael-mclaughlin   — ABOUT EDSPIRA AND ITS CREATOR https://www.edspira.com/about/ https://michaelmclaughlin.com