Hiring a Payroll Auditing Firm, Question 14: Should Payroll Audits for all Employers be Random or Should They all be “for Cause” Audits?

Posting by Larry Beebe, CPA

Some audits should be selected for cause. Factors such as participant complains, whether the employer is new, whether the employer is terminating a relationship with the plan, and dramatic difference in contribution levels from month to month or over time should determine which employers are targeted for an audit. One “for-cause” audits are selected, the remainder can be selected at random or over a cycle.

Random audits should be conducted when the size of the plan makes it impossible to audit all employers in a three or four year cycle. Random audits insure that all employers have a chance of being selected for audit.

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