Payroll Audit

Payroll Audit is a systematic review of payroll processes and records to confirm accuracy, compliance, and proper payments to employees. It checks calculations, deductions, tax withholdings and recordkeeping.

What is a Payroll Audit

A payroll audit verifies that employees are paid correctly, benefits and taxes are applied, and that payroll reports match financial records. It detects errors, omissions, and potential fraud.

How does it work

Audits compare payroll registers, time records, tax filings and general ledger entries. Typical steps include data extraction, reconciliation, exception testing and corrective action recommendations.

Payroll audits protect organisations from financial loss and regulatory penalties by ensuring accurate pay and documentation.

Practical usage and examples

Organisations use payroll audits for internal controls, preemptive compliance checks, mergers and acquisitions, and year end reviews. Recruiters and hiring managers rely on accurate payroll data for offer calculations and budgeting.

• Example 1: Reconcile payroll register with bank disbursements to find duplicate payments.
• Example 2: Verify overtime calculations against timecards to ensure wage and hour compliance.
• Example 3: Review tax withholdings after a benefits change to correct filings.

Related HR concepts

Related terms include payroll reconciliation, payroll compliance, internal audit, tax withholding, timesheet verification and wage and hour law. See your internal Payroll policy for specific procedures.