Preventing and Detecting Payroll Fraud

1. Preventing and detecting Payroll Fraud
A combination of the following steps will help prevent and detect payroll fraud:
• Segregation of duties at all times — separate payroll preparation, authorization and distribution functions.
• Monitoring payroll records for unusual "accounting" adjustments, such as excessive payments without deductions, large payroll reversals near year-end, etc.
• Minimal use of cheque payments and increased use of payments by direct deposit.
• Monitoring payroll records for duplicate names/addresses or postal codes, incorrect identification numbers and other anomalies.
• Separate segregation and oversight of amendments made to payroll master files, such as direct deposit details, to prevent unauthorized changes.
• Conducting surprise audits to ensure, for example, that all employees on a payroll exist and have an employee file.
• Reconciliation and independent reporting of variations in payroll expense month to month, quarter to quarter with supporting documents as well as comparing current payroll levels to prior years.
• Conducting thorough pre-employment reference checks for all payroll administrators to identify previous fraudsters.
• Reconciling payroll expense and the actual amounts paid to the authorized payroll on a regular basis, and conducting immediate follow-up whenever discrepancies are identified.
2. Beware of your vulnerability to fraud by lax controls over your payroll systems
What Adele Sharpe was a compulsive gambler, and she hid it well. Her problem began innocently at work when one day a casino website popped up on her computer as she surfed the Internet during lunch. She placed a few bets using the free credits offered by the site to entice first-time players. She won, and that gave her a thrilling feeling, she would later explain to fraud investigators.
Two years later, as the payroll manager of a