Can you list six internal controls you could expect operating on monthly paid employees?

i- Prepare and update payroll data online

ii- Review monthly payroll expenses report

iii- Preparation of time sheets, with proper approval by repective heads

iv- Attendence recording and review

v- Periodical review and update signature authorization

vi- Keep private and sensitive information secured

1. Automated timekeeping systems. Depending on the circumstances, consider installing a computerized time clock. These clocks have a number of built-in controls, such as only allowing employees to clock in or out for their designated shifts, not allowing overtime without a supervisory override, and (for biometric clocks) eliminating the risk of buddy punching. Also, you should send any exception reports generated by these clocks to supervisors for review.

2. Calculation verification. If you are manually calculating payroll, then have a second person verify all calculations, including hours worked, pay rates used, tax deductions, and withholdings. A second person is more likely to conduct a careful examination than the person who originated the calculations.

3. Hours worked verification. Always have a supervisor approve hours worked by employees, to prevent employees from charging more time than they actually worked.

Match payroll register to supporting documents. The payroll register shows gross wages, deductions, and net pay, and so is a good summary document from which to trace back to the supporting documents for verification purposes.

4. Match timecards to employee list. There is a considerable risk that an employee will not turn in a timesheet in a timely manner, and so will not be paid. To avoid this problem, print a list of active employees at the beginning of payroll processing, and check off the names on the list when you receive their timesheets.

5. Overtime worked verification. Even if you do not require supervisors to approve the hours worked by employees, at least have supervisors approve overtime hours worked. There is a pay premium associated with these hours, so the cost to the company is higher, as is the temptation for employees to claim them.

6. Pay change approval. Consider requiring not just one approval signature for an employee pay change, but two signatures – one by the employee’s supervisor, and another by the next-higher level of supervisor. Doing so reduces the risk of collusion in altering pay rates.