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.

Key Controls

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?