Created by Praveen Chowdary

Internal Audit Checklist for Payroll

Department
Created by Praveen Chowdary

Payroll Audit
▪ An internal audit of the payroll
department is critical to ensure that
the organization is compliant with
applicable laws and regulations, and
that payroll processing is accurate and
timely
▪ Here are some items to include in an
internal audit checklist for the payroll
department
Created by Praveen Chowdary

1. Payroll Policies
and Procedures
▪ Review the organization's payroll
policies and procedures to ensure that
they are up-to-date and in compliance
with applicable laws and regulations
▪ Assess whether the policies and
procedures cover all aspects of payroll
processing, including tax withholding,
deductions, and payments
Created by Praveen Chowdary

2. Employee Data
Management
▪ Review the payroll system to ensure
that employee data is accurate and up-
to-date
▪ Verify that employee information, such
as Social Security numbers, addresses,
and tax withholding information, is
correct and complete
Created by Praveen Chowdary

3. Payroll
Processing:
Review
▪ the payroll processing procedures to
ensure that they are accurate and
timely
▪ Assess whether the payroll is
processed on a regular schedule and
whether payroll processing is
completed in a timely and efficient
manner
Created by Praveen Chowdary

4. Tax Withholding
and Reporting
▪ Review tax withholding and reporting
procedures to ensure that they are
accurate and comply with all
applicable laws and regulations
▪ Verify that all federal, state, and local
taxes are withheld and reported
correctly, and that the organization is
filing all necessary tax returns
Created by Praveen Chowdary

5. Employee
Benefits and
Deductions
▪ Review employee benefit and
deduction procedures to ensure that
they are accurate and in compliance
with applicable laws and regulations
▪ Verify that employee deductions, such
as 401 contributions, health insurance
premiums, and garnishments, are
calculated correctly
Created by Praveen Chowdary

6. Payroll Record
Keeping
▪ Review payroll record-keeping
procedures to ensure that they are
accurate and complete
▪ Verify that payroll records are retained
for the required period of time and that
they are easily accessible for review
Created by Praveen Chowdary

Review the payroll audit trail to ensure that all

payroll transactions are accurately recorded and
traceable

Verify that all changes to employee records and

payroll transactions are authorized and
documented

Overall, the internal audit checklist for the payroll

department should focus on ensuring compliance
with applicable laws and regulations, accuracy of
payroll processing, and completeness of payroll
records and documentation
Created by Praveen Chowdary

8. Third-Party
Payments
▪ Review third-party payments made on
behalf of employees, such as child
support, alimony, and wage
garnishments, to ensure they are
calculated accurately and paid on time
Created by Praveen Chowdary

9. Overtime and
Leave
Management
▪ Review overtime and leave
management policies and procedures
to ensure they are in compliance with
applicable laws and regulations
▪ Verify that employees are paid for
overtime and leave time correctly and
that the organization is tracking and
managing employee absences properly
Created by Praveen Chowdary

10. Internal
Controls
▪ Review internal controls to ensure that
there are adequate checks and
balances in place to prevent errors,
fraud, and abuse
▪ Verify that all payroll transactions are
authorized, reviewed, and approved by
appropriate personnel
Created by Praveen Chowdary

11. Reconciliations
▪ Review payroll account reconciliations
to ensure they are accurate and
complete
▪ Verify that all payroll accounts,
including payroll tax liabilities, are
reconciled on a regular basis
Created by Praveen Chowdary

12. Payroll
Auditing and
Reporting
▪ Review payroll auditing and reporting
procedures to ensure that they are
accurate and timely
▪ Assess whether the organization is
conducting regular audits of the
payroll system, and that all required
payroll reports are filed on time and
accurately
Created by Praveen Chowdary

13. Payroll
Disaster Recovery
Plan
▪ Review the payroll disaster recovery
plan to ensure that it is in place and
tested periodically
▪ Assess whether the organization has a
contingency plan in place to handle
payroll processing in the event of a
disaster
Created by Praveen Chowdary

14. Employee Data

Privacy
▪ Review employee data privacy policies and procedures
to ensure that employee data is protected and secured
▪ Verify that the organization has established policies and
procedures for handling confidential employee
information and that all payroll-related data is secured
properly
▪ Overall, the internal audit checklist for the payroll
department should focus on all aspects of payroll
processing, including accuracy, compliance, internal
controls, and disaster recovery planning