The Payroll Game Changer

Articles following on from the conference

Preparing for an audit

Lydia Baines, HR Systems and Payroll Manager from T&G spoke at the Payroll Game Changer conference a couple of weeks ago about what you can do to prepare for an audit.

From working in HR my whole career, I’ve only ever been on the peripheral of audits. It is usually payroll who have to do most of the work providing data and answering questions – and often in the same week as a pay run and when there are lots of other deadlines! This could perhaps be an area that HR help the payroll team out with a little more.

But Lydia shared some great tips on what to expect and what you can do. Here’s what stood out for me from the highly enjoyable and interesting session.

  1. Being audited is an awful experience to go through, but Lydia advised to get your whole payroll team involved. It’s experience that every payroll person needs to develop – so even if you’ve helped with one before, it’s going to prepare you much better for if you’re the Payroll Manager when an audit is happening.
  1. Tell the auditors up front if there are things that you think might be incorrect. This may be due to the Holidays Act being so hard to apply correctly, or your payroll system doing strange things – but tell them about it because murphy’s law, that one employee pay record will be the one they pick. Better that you let them know up front!
  1. Document the weird stuff that’s in your head or your team’s head! You may know that Peter always works a half day on a public holiday and has a weird calculation of his leave – but leave a note of that so in the future other payroll people know. There’s nothing worse than coming into a company, being audited and finding that you don’t know about all the strange calculations happening, or you don’t know why they are done that way. So help the future payroll team out and document it. Auditors don’t care if you’ve just started and don’t know.
  1. Change to online filing. At the conference most of the audience raised their hands that they are still doing paper filing. Lydia says that online filing makes it easier to find any mistakes.
  1. Make sure your auditors understand what you do. Lydia shared an example of when she sat in a room and told the auditors all the processes and then asked if they wanted to see it in action. They said no. And then the report they filed was completely wrong about the processes. So make them see them in action so they really understand how you do it.

Lydia talked about the fact that you can see the Auditors as scary or you can see them as someone who isn’t just there to tell you you’re wrong. They are there to tell you there is a different way to do something. So learn from that. You can also say ‘no’ to an Auditor. They can recommend how you do something but it’s not a requirement. In one audit Lydia was involved in the Auditors recommended that there was complete segregation of duties. To do that, Lydia would have needed to hire 2 more people into the Payroll team. There wasn’t the budget to do that. And in fact, most fraud actually happens in accounts, with people paying money to their own bank account. Very little fraud that Lydia has heard about has happened in Payroll, so the segregation issue wasn’t high risk.

Lydia finished by saying that sometimes and audit result can be good news. After a recent audit with EY, the company have introduced a policy that everyone must have 2 weeks continuous annual leave to reduce risk. The Payroll team were really excited about that as they never get to have 2 whole weeks off. So the result was very well received!

Overall while an audit is stressful and time consuming (it can take months), Lydia recommends that having an audit will help you improve. You may choose to have EY, or Deloitte do an audit before MBIE audit you, as MBIE can issue large fines (although you’ll also pay EY or Deloitte a lot of money to audit you!).

I thought these were some great tips to know what to expect and how to think about auditing and hope you find them useful too!


Angela Atkins is a best-selling author and business entrepreneur who has a passion for providing development and training for HR, payroll and people managers through the Management Bites programme and through both Elephant New Zealand and Elephant Group UK. The next Payroll Game Changer conference will run in February 2018.


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This entry was posted on March 7, 2017 by in Payroll and tagged , , , .
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