Payroll Audit and Compliance Review in Bangalore
Definition
The definition of a payroll (compliance) audit is to determine through the review of the payroll records that the employer is in compliance with the terms of the Collective Bargaining Agreement with regard to the employer’s contributions to the benefit fund(s) and to ascertain that the contribution reports are correct. In other words, that the correct employees have been reported at the correct time, at the correct rate(s) for the correct number of units (hours/days/weeks/months/wages).
A payroll audit is different from a financial audit in two major areas. First, the audit period for a payroll audit is not the standard one year period like it is for a financial audit. Second, the scope of the payroll audit is limited to the payroll records and no opinion of the financial statements as a whole is made.
Under the terms of the Employee Retirement Income Security Act of 1974 (ERISA), the trustees have the responsibility to collect the correct contributions. Payroll audits provide assurance that the correct contributions have been made. ERISA also requires an annual audit of the fund by a qualified, independent, certified public accountant. And the Department of Labor (DOL) requires an unqualified opinion unless the plan has obtained a limited scope audit exemption from the DOL. Again, payroll audits provide assurance that correct contributions have been made.
Legal Compliance: This entails ensuring that the organization follows all federal, state, and local laws related to payroll, including minimum wage laws, overtime regulations, tax withholding requirements, and employment classifications.
Accuracy of Records: Auditors check the accuracy of payroll records, including employee hours worked, wages paid, deductions, and benefits. They verify that calculations for gross pay, taxes, and deductions are correct.
Employee Classification: Auditors assess whether workers are correctly classified as employees or independent contractors. Misclassification can lead to legal and financial penalties.
Benefits Administration: They review the administration of employee benefits such as health insurance, retirement plans, and paid time off to ensure compliance with regulations and company policies.
Tax Compliance: Auditors verify that payroll taxes are calculated accurately and paid on time. This includes federal income tax withholding, FICA (Social Security and Medicare) taxes, and state and local taxes.
Recordkeeping: Auditors examine payroll records for completeness, accuracy, and retention compliance. Proper recordkeeping is essential for both legal compliance and effective business management.
Internal Controls: They assess the effectiveness of internal controls surrounding payroll processes to prevent fraud, errors, and unauthorized access to sensitive information.
Reporting: Auditors ensure that required reports, such as W-2 forms and payroll tax returns, are filed accurately and on time with the appropriate authorities.
Benefits to the Fund
- Proper contributions are received
- Verification of accurate and complete participant records
- Verification of monitoring contribution collections by fund trustees
- Promotes timeliness in recognizing reporting errors
- Avoids Department of Labor problems
Benefits to the Employer
- Proper contributions are made
- Promotes timeliness in recognizing reporting errors
Created & Posted by Kartar
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