Question

Explain how payroll frsud can be prevented.

Answer 1

Payroll fraud is one of the costliest fraud in the corporate world and costs hundreds of thousands of dollars to the company.

Payroll is one of the largest expense for any organisation and should be controlled carefully. A lot of payroll fraud goes undetected and often not published to the public.

The different ways to prevent payroll fraud are:

1. Regular mandatory vacations should be introduced for all the employees those who process payroll. In this way the responsibilities of that employee will be performed by another employee and any fraud performed can be easily detected.

2. The payroll reports prepared should be regularly monitored by their seniors or other employees of that organisation.

3. All the overtime hours worked should be carefully monitored to ensure they are legitimate.

4. For every task performed, two employees should be allocated for that task. One payroll employee can enter the payroll and the other person can check the accuracy. In this way frauds can be minimized to a great extent.

5. The payroll employees should get enough training at frequent intervals and the shifts timings should be rotational. It may be weekly, monthly.

6. All the bank statements and cancelled checks should be checked every month to spot anomalies.