Hiring a Payroll Audit Firm, Question 3: How Many of Your Payroll Audits Have Findings?

Posting by Larry Beebe, CPA

As part of this series, I am providing Plan Trustees with a list questions they should ask when requesting proposals from payroll auditing firms.  Click here to view the full list of questions.

Question 3: How many of your payroll audits have findings?

Is the firm you are going to hire qualified to perform payroll audits and will they do a quality job?  Any accounting firm can state that they know how to perform a payroll audit, but you get what you pay for.  If a firm says it can do payroll audits for a mere $500 per audit, you should be very skeptical about the quality of the audit.  The firm’s testing may not be very extensive and the audit may not have very many findings.

The number of payroll audits with findings will vary with industry and with a number of other factors, such as the state of the economy, the health of the industry, and whether the industry has a stable workforce.  Bond Beebe has found that approximately 30% of payroll audits have no findings and about 10% of payroll audits have findings that are greater than $25,000.  That means that approximately 60% of payroll audits have findings between $0 and $25,000.  The relationship of the total dollar findings to the total audit costs should always be considered in your payroll audit program; you want payroll audits to pay for themselves.

The firm you hire should be able to provide you with statistics showing the percentages of their payroll audits that have findings.   Check to see if their percentages are similar to those guidelines detailed above and ask for more information if the numbers don’t add up.

For more in this series, see:

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