Payroll Audit

A payroll audit is a systematic review of a company's payroll records, processes, and calculations, conducted to verify accuracy, identify discrepancies, and ensure ongoing compliance with applicable tax and labor law requirements. Payroll audits can be performed internally by a company's own finance or HR team, or externally by an independent auditor, and may occur on a regular scheduled basis or in response to a specific concern. A thorough payroll audit typically examines areas such as whether employees are correctly classified as exempt or non-exempt, whether tax withholdings and deductions have been calculated accurately, whether required benefits contributions have been properly made, and whether the company's payroll records are complete and properly documented. Auditors often sample a subset of pay periods and employee records to identify patterns of error rather than reviewing every single transaction in detail. Conducting regular payroll audits helps companies catch and correct errors before they compound over time or attract regulatory scrutiny, and can be particularly valuable after significant events such as a payroll system migration, rapid company growth, or expansion into new states or countries where compliance requirements may differ from what the company is accustomed to managing.