hr audit

Even in small companies, HR data can become difficult to keep organized and keep track of if carefully managed systems are not in place. If HR records are kept manually, the sloppiness of one manager can be a red flag that invites an audit. Disorganized records are difficult to review, so the government may feel that a company has something to hide when detailed records of HR information are not kept organized and easily accessible.

Payroll Data Does Not Match Organizational Charts

Manual organizational charts are very difficult to keep synced up to payroll data. Employee titles and job responsibilities are continuously changing and employees are frequently hired and terminated. When organizational charts reflect certain pay rates and payroll tells a different story, it can invite an audit.

People That Have Been Terminated Are Still Getting Paid

In small companies, it is exceedingly rare for someone that has been terminated to continue to get paid, but it is much more common in larger companies-and it is illegal. When there are hundreds of employees and complicated systems in place for terminations, a terminated employee may slide right under the radar and continue to receive a paycheck. This is a clear indication of shoddy and disorganized practices, so the government may suspect a scandal.

Security Access Isn’t Tightly Controlled

One of the most important internal controls for a company is the determination and control of who has security clearance to access what HR data. Access to data is generally easier to control when data is filed and managed electronically and protected with passwords. However, even then it is important to educate managers and key employees on the importance of keeping passwords secret, not sharing security cards, and following any other security measures that have been put in place.

Another aspect of controlling security access is accountability. Data should be reviewed periodically and errors made by those with clearance should be addressed and evaluated for possible breach of security. If managers or employees are caught sharing passwords, there should be a traceable trail of disciplinary action that was taken that can be presented in the case of an audit.

Segregation of Duties Isn’t Clearly Observable

Companies are required to have a clearly observable segregation of duties that makes it easy to determine who has access to what HR information, who is making changes, and when. This makes it possible to identify failed access attempts and security threats. A well organized, automated organizational chart will help to keep the segregation of duties clear and help to decrease the risk of an audit.

Many Processes Are Manual

When many HR processes are manually completed, it is much easier for an organization to falsify records and it is more difficult to pinpoint errors or discrepancies, which can be a red flag. The likelihood of audit compliance and the risk of errors and issues greatly decreases as more processes are automated through an HRIS. An HRIS can help to decrease the likelihood of your company being flagged for an audit, but it can also make audit compliance much simpler in the event that one is conducted.

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