Getting ready for a payroll audit can be a daunting task. Federal and provincial/territorial governments have the authority to examine an organization’s records or conduct payroll audits at any time. Payroll practitioners need to ensure their organizations are compliant.
However, more than half of all business owners in Canada don’t know how to prepare for a payroll audit, but don’t worry, we’ve got you covered. Here are our top 10 insider tips to help ease payroll audit anxiety, developed by the National Payroll Institute.
1. You’ll Receive a Written Notice of Audit in Advance
There will be no surprise knock at your door. The government will notify you in writing if you are selected for a payroll audit. The written notice will include a proposed date and time of the audit and a listing of what documents you’ll be required to produce.
2. If the Proposed Time Doesn’t Work, You Can Reschedule
You can request that the auditor reschedule the payroll audit for a more appropriate time for you and your business (within reason).
3. Your Audit Notice Will Include a List of All the Information Your Auditor Expects to See
You’ll be given time to prepare and gather all requested documents. Sometimes, depending on the requested records, you might have to ask for additional time. For example, it may take longer to produce documents stored off-site or out of the country.
4. You Don’t Necessarily Have to Print the Documents
The auditor may want to see a lot of information, some of which will be in digital form or come from a third-party vendor (e.g. payroll software provider). Auditors can review digital as well as print documents and can even be given temporary access to third-party information.
5. You Should Ask the Auditor to Produce Their ID
Because the auditor is granted access to confidential information, you should ask them to officially identify themselves by producing valid identification. If they can’t present proper credentials, they should not be given access to your files.
6. It’s up to You to Determine Your Key Stakeholders
You are responsible for identifying the person or persons best equipped to participate in the payroll audit. The auditor will delve into the payroll and accounting information, so everyone you identify as a critical stakeholder in the audit should be prepared to speak to the information at hand.
7. The Auditor Will Likely Pinpoint Certain Issues They Want to Focus On
The auditor will likely take a deep dive into key issues they have identified as priorities. The National Payroll Institute shares a Payroll Audit Best Practices Guidelines, so you can prepare in advance.
8. At the End of the Audit, You Will Be Given a Written Recommendation Report
The report will likely contain one or more of the following outcomes:
- No assessment needed (compliant audit)
- Notice of over-remittance (they owe you money)
- Notice of outstanding payments (you owe them money)
- Penalties or fines applied
9. If You Are Non-Compliant, You Can Be Given Time to Fix Your Errors
Even the most well-intentioned employers may be found non-compliant during an audit. Depending upon the severity of the infringement, the auditor will likely allow you to fix any issues without incurring penalties.
10. You Can Appeal the Auditor’s Ruling
If you disagree with the auditor’s ruling, you have the option to appeal (usually within 90 days).
Have you ever had a payroll audit? Share your experience in the comments to prepare other colleagues.
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This information is great. It tells what is expected in an audit and how to prepare for it.3 weeks ago
Fortunately, I have not have an payroll audit ever.