The payroll cycle broadly covers seven key functions:
- Hiring employees
- Authorising payroll rates and deductions etc.
- Time and attendance recording
- Processing payroll
- Payment of payroll
- Remittance of various payroll taxes (PAYG/ Payroll Tax)
- Preparation of payroll tax returns (i.e. BAS)
Payroll related costs commonly represent a significant part of the total costs of any business. The payments made are usually large and therefore present a set of unique risks.
Ensuring that you have adequate internal control in this area is imperative.
Some questions to consider in evaluating controls in the payroll cycle are:
- Is proper segregation of incompatible duties maintained (i.e. bank signatory is separate from person processing payroll)?
- Are access controls in place?