Payroll Audits vs. 100% Assurance

Posting by Kurt Needles, CPA

After teaching my session on payroll auditing at the IFEBP conference, I had the opportunity to continue my discussion with the staff of a mid-central administrative office. Not only did they disagree with some of my comments, they thought I was completely wrong. The issue boiled down to “what is the function of the audit”. Is it to give the plan reasonable assurance that the contributions are being remitted correctly, or is it to give them 100% assurance that everyone reported is 100% correct? They believe you audit 100% of all companies and copy 100% of the payroll. No sampling, no auditor judgment, just human copy machines.

This issue has popped up again this week with one of our newer clients. They want to be sure that everyone is 100% correct. They want us to supply them with additional documentation that our reports are correct. They also want us to type out persons that were reported correctly, even though they are in the system correctly.

All large entities, businesses and Benefit Plans must learn to live with some level of error. Perfection is a goal, but at what cost? The question is, do the internal controls work? What is the cost for 100% coverage, 100% of the time? Is it benefit worth the cost? After 30 years I am positive that all Plans are best served allowing experienced auditors do their job and live with the fact that some level of error will always exist.

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