Applications of IDEA - payroll

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IDEA user group 5 june 2013 - Grant Thronton

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Applications of IDEA - payroll

  1. 1. © 2013 Grant Thornton UK LLP. All rights reserved. Applications of IDEA: Auditing Payroll
  2. 2. © 2013 Grant Thornton UK LLP. All rights reserved. Aim • Understand how IDEA can be used to test payroll • Share ideas on audit approach • Share ideas on technique • Consider benefits of testing payroll in your organisation • Create a comprehensive list of payroll tests
  3. 3. © 2013 Grant Thornton UK LLP. All rights reserved. Agenda 1. What do you do? 2. Audit risks concerned with payroll 3. Why use IDEA 4. Concept of payroll data 5. Testing 6. Fraud scenarios 7. Findings 8. Automation of tests 9. Case studies 10. Final questions
  4. 4. © 2013 Grant Thornton UK LLP. All rights reserved. 1. What do you do?
  5. 5. © 2013 Grant Thornton UK LLP. All rights reserved. 2. Risks concerned with payroll • Payroll internally or externally • Large financial amounts • Integrity of the information • Security of the information
  6. 6. © 2013 Grant Thornton UK LLP. All rights reserved. 2. Risks concerned with payroll 1. An employee obtaining payments to which they are not entitled. 2. An employee directing payments to themselves by creating a fictitious employee. 3. An employee stealing money directly from the payroll. 4. Tax and other deductions are not calculated correctly. 5. Material misstatement in the financial statements.
  7. 7. © 2013 Grant Thornton UK LLP. All rights reserved. 3. Why use IDEA • Import data from variety of sources (including outsourced solutions) • Use scripts for monthly auditing of payroll • Append monthly files together • Join tables to allow descriptive information to be included
  8. 8. © 2013 Grant Thornton UK LLP. All rights reserved. 4. Concept of payroll data • Master data Employee records – address, bank details, pay scale • Transaction data weekly, monthly, ad hoc payments – wages, salary, bonus, expenses
  9. 9. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing • Analysis • Calculations • Exceptions • Reasonableness • Gaps and duplicates • Matching and comparing • Transaction data
  10. 10. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing - Analysis Basic Intermediate Advanced Summarise and stratify salaries by department/grade Profile employee ages/years of service to assist in forward planning Summarise and compare costs for special pay, overtime, premiums Summarise payroll distribution for reconciliation to general ledger Analyse costs for special pay, overtime, premiums
  11. 11. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing - Calculations Basic Intermediate Total gross pay, net pay, deductions and any other value fields Check calculation of gross and net pay
  12. 12. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing - Exception Tests Intermediate Extract all payroll payments where the gross amount exceeds a set amount (eg large salaries)
  13. 13. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing - Reasonableness Tests Basic Intermediate Advanced Pay/grade comparison Sickness & holidays taken Tax rates Hours worked, overtime claimed Report activity on records for new or terminated employees Find changes in key payroll data, such as gross pay, hourly rates, salary amounts Date of birth (over 65, under 16) Identify records with missing information (National Insurance number etc)
  14. 14. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing - Gaps and Duplicates Basic Duplicate employees (National Insurance, Employee numbers, addresses) on payroll file Duplicate bank account details Duplicate names and date of birth Duplicate payments
  15. 15. © 2013 Grant Thornton UK LLP. All rights reserved. 5. Testing - Matching and Comparing Basic Intermediate Advanced Compare time-card entries and pay to payroll and indicate variances Join payroll transactions file, to payroll master to determine if there are "ghost" employees on the payroll Comparison of payroll file at two dates to determine recorded starters and leavers, and changes in pay Compare supplier addresses/bank accounts to employees to identify conflict-of- interest Determine if payments have been made to leavers after they have left.
  16. 16. © 2013 Grant Thornton UK LLP. All rights reserved. 6. Fraud scenarios Phantom employees Supplier payments Collusion Tax False expenses or hours worked
  17. 17. © 2013 Grant Thornton UK LLP. All rights reserved. 7. Demonstration using IDEA
  18. 18. © 2013 Grant Thornton UK LLP. All rights reserved. 8. Automation of tests • IDEA script can be used to automate payroll tests • Smart Analyzer • Manual process as data and criteria varies hugely for GT work
  19. 19. © 2013 Grant Thornton UK LLP. All rights reserved. 9. Case studies • Facilities Management company – 70,000 employees, £900m annual payroll costs • Retailer company - 22,000 employees, £150m annual payroll costs
  20. 20. © 2013 Grant Thornton UK LLP. All rights reserved. 10. Final questions Thank you for your time

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