Preventing and Detecting Payroll Fraud Essay

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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

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