Because of the self-policing nature of the accounts and the regulatory restrictions of the Internal Revenue Service and the Department of Labor, controls over payroll are normally stronger than in other areas (Louwers, Ramsay, Sinason, & & Strawser, 2007). The four elements of a payroll internal control system are personnel, supervision, timekeeping, and record keeping.
The personnel or human resources department should have authority to add new employees to the payroll and delete terminated employees. Each employee should have a payroll/personnel file, containing updated salary, benefits, employment status, and withholding information as well as beginning date of employment and termination date, when applicable (Labyrinth, Inc, 2011). Terminated employees should have exit interviews so that the personnel department can remove them from payroll. Final checks and W-2s should be mailed to the employee’s home (Louwers, Ramsay, Sinason, & & Strawser, 2007).
Supervisors should approve any overtime. The immediate supervisor should approve number of hours worked, job number, absences, and time off permitted for emergencies. Finally, supervisors compare production plans and budget reports to employee costs for discrepancies (Louwers, Ramsay, Sinason, & & Strawser, 2007).
The time sheet is the most common tool used to document employee hours and authorize payments to employees. These sheets include information concerning vacation, sick leave, and holidays. Time...