STANDARD AUDIT PROGRAM System Under Review: PAYROLL PROCESSES MAIN AUDIT OBJECTIVES: 1. To confirm that the payroll function is properly controlled and operating efficiently. 2. To ensure that authority for all pay entitlement is clearly defined and effectively exercised. 3. To ensure that employees on the payroll are valid and that leavers do not remain on the payroll. 4. To ensure that salary additions are bona fide & timesheets are authorised 5. That payroll deductions are correctly applied. MAIN OBJECTIVE 1: To confirm that the payroll function is properly controlled and operating efficiently. DETAILED AUDIT OBJECTIVES: 1. To ensure that there is adequate segregation of duties over the payroll process. 2. Ensure that duties are assigned so that no one person is in a position to perpetrate and cancel/hide errors/irregularities in the normal course of their duties. 3. To confirm that Policy & Procedure documentation relating to the payroll process exists. MAIN OBJECTIVE 2: To ensure that authority for all pay entitlement is clearly defined and effectively exercised. DETAILED AUDIT OBJECTIVES: 1. To ascertain whether the payroll has a special bank account and if so how this is funded. 2. To confirm that the payroll is checked and authorised before transmission via the modem to BACS. 3. To ensure that the payroll reports are examined and retained securely. 4. To confirm that access to the database is restricted. AUDIT TESTS: 1. Ascertain the system for accounting for payroll transactions inc. part payments at start & end of employment. Review the bank statements to confirm that the payroll amount is consistent. 2. Take a sample of timesheets and ensure that these have been authorised by the Manager prior to payment being made. Obtain evidence that a sample of Gross pay payments are checked before transmission is allowed. Trace a sample of payroll figures to the nominal ledger. 3. Obtain the BACs listing & payslips from the last run and confirm that these are agreed to the transmitted figure and that co 4. Confirm, by observation, enquiry & test that they payroll system is passworded. Ensure that machines are 'logged off' when not in use. Confirm that passwords are unique to operators and regularly changed. Is the forced change option available? MAIN OBJECTIVE 3: To ensure that employees on the payroll are valid and that leavers do not remain on the payroll. DETAILED AUDIT OBJECTIVES: 1. That records are promptly and correctly updated. 2. That employees on the payroll are valid NB: as an on-going test, Internal Audit will ascertain the presence of all employees from the payroll records to the unit being re AUDIT TESTS: 1. Select a sample of leavers from Personnel records. Review the payroll records to ensure that payments have been cancelled. Sample check calculations to ensure the correct Gross salary payments have been made. Ensure that a check of the calculations has been performed. Confirm that cheques have been raised and have been sent directly to the employee. 2. Using the latest organization chart, select a sample of enterprises/ departments and trace all employees to the payroll. Inv MAIN OBJECTIVE 4: To ensure that salary additions are bona fide & timesheets are authorised DETAILED AUDIT OBJECTIVES: 1. To ensure that any additions to the basic pay are authorised and correctly calculated. 2. That timesheets are complete and authorised. AUDIT TESTS: 1. From the copy payroll reports, identify, using the payroll codes non-standard payments such as overtime or bonus. Check to source documentation and to the costing centre. Ensure that the transaction has been properly authorised. 2. Sample check, by week, and ensure that the timesheets are properly completed and authorised. MAIN OBJECTIVE 5: That payroll deductions are correctly applied. DETAILED AUDIT OBJECTIVES: 1. To ensure that absence due to holidays and sickness from all staff is reported. 2. To confirm that Maternity pay is correctly paid. 3. To ensure that Pension contributions are correctly applied. 4. To confirm that other deductions are properly controlled (i.e.: HSA, BUPA, Savings, Staff Loans, Rent, Jury Service) 5. To ensure that PAYE & NI contributions are submitted on a timely basis to the relevant tax offices and that the internal accou AUDIT TESTS: 1. Obtain the weekly absence reports and ensure that a report is received from all areas. Ascertain the system for reporting From a sample of forms, check to the personnel records to ensure that absence is correctly recorded and carried forward i.e. s Review a sample of cases where sick pay (SSP) has been paid and ensure that medical certificates are held. Trace a sample of 'sick' files to cost centres to ensure that only the Company pay minus SSP has been posted. 2. Ascertain the number of women currently on maternity leave. Take a sample of cases and ensure that the deductions hav 3. From the sample of files chosen, identify those where pension forms have been completed. Trace the pension deduction to the payslip and through to the disbursement sent monthly to Pension Provider. 4. Take a sample of cases where the following apply and trace to original documentation: HSA, BUPA, Savings, Staff Loans 5. Using the sample for Pension contributions above, trace the monthly & weekly copy pay-slip amounts to the Nominal ledg From the Nominal Ledger, confirm that cheques have been raised & forwarded to the Tax Offices before the 19th of the followin Review the annual tax returns to ensure that they were submitted within the required timescale. Ascertain whether the tax tables are checked prior to being made live and confirm, if possible, that the amounts entered are cor Internal Audit Payroll Programme Designed by Sharon Cooper. November 1999. ating efficiently. effectively exercised. rt & end of employment. nager prior to payment being made. d to the transmitted figure and that copy payslips are stored confidentially. ge option available? o not remain on the payroll. he payroll records to the unit being reviewed. trace all employees to the payroll. Investigate any anomalies. ts such as overtime or bonus. f Loans, Rent, Jury Service) ax offices and that the internal accounts are reconciled monthly. s. Ascertain the system for reporting absence by Management. ly recorded and carried forward i.e. sickness & holidays. ertificates are held. SP has been posted. s and ensure that the deductions have been correctly applied and authorised e.g. 1st 6 weeks 90% salary, next 12 weeks £54. o Pension Provider. n: HSA, BUPA, Savings, Staff Loans, Rent, Jury Service. pay-slip amounts to the Nominal ledger. Offices before the 19th of the following month (i.e. Sept deductions should be forwarded by 19th of Oct.) ble, that the amounts entered are correct to tax office documentation. ry, next 12 weeks £54. HUMAN RESOURCES REVIEW BANK_____________________________________ Reviewer Date NEW HIRES AND PAYROLL YES NO NA Comments 1 Select a sample of new employees from Personnel records. Has the new employee been properly authorized? Is the new employee set-up on the payroll system correctly? 2 Examine the possibility of setting up 'Ghost' employees and the intercepting of the payslip. Who can access the system to amend standing data? Who reviews the exception reports and error logs? Who makes corrections when errors found? 3 Employee records reviewed, determine the following: Does the employee exist? Is employee still employed by bank? 4 Review payroll documentation for completeness. Conform to compliance with minimum wage laws? W-4 Application Reference checks Signed authorized to obtain credit report Credit report Photograph (if applicable) Signed receipt for personnel handbook Signed receipt for Code of Ethics 401(k) plan acceptance Medical insurance acceptance or waiver Charitable contribution authorization (if applicable) Payroll election form Life insurance form I-9's (required of all employees hired after 11/7/86 per the US Dept of Justice Immigration Reform & Control Act of 1986) Retention of I-9's (3 yrs after date of employment begins OR 1 yr after date of employment is terminated, whichever is later) 5 Review settlement to general ledger. Trace the payroll register posting to the GL Any explanations for differences? Trace reconciling items to final disposition Review overtime records for: Is OT paid accurately? No OT to exempt employees? Was OT authorized? 6 Determine that each employee was paid at the proper rate approved by management. Non-exempt (hourly emp) time sheets approved by supervisor? Exempt (salaried emp) paid the correct amount? 7 Verify the bank has on file a written affirmative action program. 8 Confirm the bank is filing the following reports required by state and federal law: Employer's return of State tax withheld US Dept of Labor Federal report Employer's return of Federal tax withheld FICA Tax report (Form 941) Federal unemployment tax-FUTA report (Form 940 or 940EZ) Workman's Compensation report Dept of Employment Security report W-2 Wage and Tax statement W-4 within 10 calendar days of hire date (name, address, SSN, DOB, hire date, salary, employer's name, address, & federal EIN) 11/2002 e08e5a2f-0e82-41fd-9d71-10d49d9aa8a8.xls Page 9 NEW HIRES AND PAYROLL (con't) YES NO NA Comments 9 Has the bank had any problem with late or inaccurate filings of any of the following reports? Reconciliation of State income tax withheld & reported Employer's Annual Federal Unemployment tax EEO Employer Information report (EEO-1/Affirmative action) (Public Law 88-352, Title VII, Civil Rights Act, 1964 & amended by EEOA of 1972) 10 Does the bank have an Affirmative Action Plan? (required for banks w/50 or more employees) Does it include (1) minorities & women? Does it include (2) disabled individuals? Does it include (2) Vietnam era, special disabled, other protected veterans? EEO statement contained in employment applications/forms? Advertisement contain EEO program (see #5 under Employment Advertisement section) Has the bank desiginated an affirmative action officer? An analysis of of where minorities, women, etc are under- represented & plan to remedey if found? Has an action-oriented program designed to elminate underutilization? Has a procedure for self-assessment established? Has a procedure for communication with community action programs for recruitment of women, minorities, etc? 11 Review vacations taken to determine the following: Are there any employees who have not taken vacation in accordance with established bank policy? If so, is there an adequate explanation to the reasons for the exception to policy? Do vacation hours earned match vacation hours taken? TERMINATIONS YES NO NA Comments 1 Review a sample of terminated employees for the following: Were terminating procedures followed? Was all bank property obtained (ID cards, keys, etc) Are terminated employees receiving any kind of pay subsequent to 2 weeks after termination or end of severance agreement? Recompute final salary and trace to expense check Employees terminated by the bank: Are records in file to support termination? Is there a possibility of discrimation (sex, age, religion, worker's comp, disability, national origin, marital status, garnishment, leave status, polygraph, etc)? Will the employee soon vest in any bonus, retirement, or other benefit? Has the employee protested any working conditions? Has the employee been properly paid? 2 Are employees terminated by the bank paid within 6 calendar days? 3 Are employees who terminate their employment paid by the next payday period? BENEFITS YES NO NA Comments 1 Review benefits for the following: Are there any benefits offered that are different from the Bank's approved benefit package? 2 Select a sample of employees who have taken time off in accordance with the Family Medical Leave Act: Was the reason for FMLA leave for one of the following: Birth of a child and/or care for a newborn child? Adoption or foster care of a child? Care for employee's spouse, son, daughter, or parent with a serious health condition? A serious health condition that renders the employee unable to perform the functions of his/her life? Does the employee's file contain the following: Leave of absence request form Medical certification form (if applicable) FMLA status form 11/2002 e08e5a2f-0e82-41fd-9d71-10d49d9aa8a8.xls Page 10 BENEFITS (con't) YES NO NA Comments 3 Determine the following for pension plans: For selected periods & selected former employee's, determine that disbursements are made in a timely basis and in accordance with the terms of agreements of which the plan is operated? 4 Determine the following for thrift (401k) plans: Is the signed agreement or waiver from employee's eligible to participate is on file? Determine that payroll deductions are for the amount specified in the agreement. Determine that the bank's contribution is in accordance with plan guidelines. Select randomly to check for calculation accuracy on balances. Review withdrawals from plan to determine the amount withdrawn was eligible for withdrawal. Trace withdrawal to final disposition. 5 Social Security Insurance (Medicare/Medicaid) & Group Health Plan Examine applicable payroll records for a selected period to determine that employees were assessed properly for social security insurance (if applicable). 6 Compute the bank's portion of the assessment of SSI and trace disbursements (if applicable). Obtained explanation for any discrepancies? 7 Group life, accidental death, dismemberment, and long term disability, travel accident, and worker's compensation Review applicable policies and contracts to determine that continuous coverage is maintained for eligible employees. Examine invoices for regularity of coverage and authorization for disbursement. 8 ERISAof 1974 By reference to the instrument under which the plan operates and by reference to periodic reports issued by the trustee, determine that the bank as trustee is complying with the requirements of ERISA EMPLOYMENT ADVERTISING YES NO NA Comments (The more questions answered YES, the more likely advertising is lawful and effective) 1 Does the bank have a policy for employment advertising? Is one person or department responsible to oversee it? 2 Are employment ads based on current job descriptions? 3 Is the position posted internally when advertised? 4 Does the ad state bank is an equal opportunity employter? 5 Is the ad coordinated with affirmative action program? 6 Does bank review applicant flow for indications of possible discrimation? 7 Review an employment ad for unlawful discrimimation such as: Sex, race, national origin? Pregnancy, age, military status? Marital status, disability, sexual orientation? Religion, union activity, citizenship? Worker's compensation, credit, equal pay? Health insurance, arrest records, political activity? 8 Do the ads identify a method of application for the visually or hearing impaired? 9 Do you state that you will make reasonable accomodations throughout the application process? 10 Do the ads refrain from suggestive discrimination such as "pretty, handsome, cleaning lady, recent graduate, able-bodied, non-smoker, etc.?" 11/2002 e08e5a2f-0e82-41fd-9d71-10d49d9aa8a8.xls Page 11 EMPLOYMENT ADVERTISING (con't) YES NO NA Comments 11 Does the ad overstate the attractiveness of the job? 12 Does the bank use a variety of mediums to advertise: Newspapers? Word of mouth from current/former employees? Company bulletin board? Recruiters? Public& private employment agencies? World wide web? Trade publications/professional associations? College fairs? Occupational Safety & Health Act (OSHA) YES NO NA Comments 1 Does the bank have a written policy concerning compliance with OSHA? 2 Does the bank maintain records required by OSHA? REQUIRED NOTICES (conspicuously posted) YES NO NA Comments TEXAS 1 Notice to Employes Concerning Workers' Comp 2 Unemployment Insurance 3 Attention Employees - Payday Law FEDERAL 1 Mimimum Wage Law 2 OSHA Notice - IT's the Law 3 Equal Employment Opportunity 4 Employee Polygraph Protection 5 Family & Medical Leave Act 6 Are all posters/notices posted conspicuously where employees frequent? 7 Are poster/notices posted in all branches? 11/2002 e08e5a2f-0e82-41fd-9d71-10d49d9aa8a8.xls Page 12
"Sample Agreement Cancelled"