Canadian Payroll Reporter

News May 2019 For instance, an employment standards audit may focus on records showing when and how much employers paid employ- ees for regular hours, overtime, and vacation pay, among other issues. A CRA audit may look for proof of compliance with with- holding, remitting and report- ing statutory deductions, which could include T4s, T4As, and cancelled cheques, according to Tzanetakis. "Are the employees set up properly in terms of the tax bracket and pension contribu- tions? Are all of the earnings set up correctly in terms of the tax- able benefits? Are taxes being withheld and remitted on time and do they balance back to the financial reports?" he said. "In addition, there are pen- sionable and insurable earnings for both the CPP and EI. They are really looking for the ap- propriateness of the tracking of all of that and also the accuracy around that," said Tzanetakis. When the auditor provides the list of documents that the employer needs to produce, it is important that payroll pro- fessionals review it carefully to ensure that they know which records to provide, said Tina Beauchamp, payroll compliance adviser with the CPA. "It's not always just payroll. Sometimes they are going to want to look at certain financial documents. If you have a board of directors, they may even want to see meeting minutes. Some- times it's not always at payroll's fingertips. You have to work with other departments," she said. When an auditor contacts an employer, the auditor will also normally propose a date and a time for coming to the employ- er's office to conduct the audit. If the date is not a good one for the employer, Beauchamp said em- ployers can reschedule it. "Just because the auditor has proposed a date, it doesn't mean that it is carved in stone. If that doesn't work for your organiza- tion, if you are not going to be able to have all of the necessary documents together for that date because sometimes things are stored off site, contact the auditor and negotiate a date that works for everybody," she said. In previous payroll positions before working at the CPA, Beauchamp said there were times when she had to resched- ule audits. "One time I had to call and say, 'Listen, we're just finishing off an implementation. We're putting in a new time and attendance system and this really isn't a good time for us,'" said Beauchamp. Most of the time auditors will reschedule if the employer's re- quest is reasonable, she said. When the audit begins, nor- mally the payroll professional or someone else in the organization knowledgeable about the docu- ments will spend some time with the auditor, showing them the printed records and where to ac- cess the electronic ones. "They key is to ensure that you provide access to the auditor, work with the auditor, have as- signed people who understand where to access the information, and to be co-operative with the auditor," said Tzanetakis. Once the audit is underway, Beauchamp said the auditor will generally work on their own, conferring with payroll only when they have questions. The length of the audit will vary de- pending on the agency conduct- ing it and on what the auditor finds. "If it's an initial 'everything looks good, I don't see any is- sues,' they may be done relatively quickly. If they start detecting issues, it could be a little longer," she said. When the audit is complete, the auditor will present their findings and identify any issues of concern. In some cases, there are no is- sues. In others, employers may owe outstanding amounts, in- cluding penalties or fines. Em- ployers may appeal audit results with which they disagree. While audits may seem daunt- ing, organizations can prepare for them by proactively imple- menting good internal controls and periodically conducting their own internal audits. "Setting up appropriate inter- nal controls (and consistently implementing them) is the best preparation for a government- initiated audit, along with stor- ing all backup documentation by pay period, so that it is readily available," said Graves. "Diligent internal processes, including proactive spot-checks on all payroll setups and out- puts can reduce organizational risk," she said. To help payroll professionals prepare for an audit, the CPA has created best practices guidelines and a tip sheet on what to expect. Payroll professionals who want to know more audits re- view the CPA's information, as well as talk to others in the pro- fession and in their organization who have gone through a payroll audit, said Beauchamp. She also advised that payroll professionals look at audits as an educational opportunity. "Some of the best lessons that I learned as a new payroll person came out of audits," said Beauchamp. "It wasn't that I was intention- ally doing something wrong. It was just that at the time I was new. I didn't necessarily under- stand all of the compliance leg- islation and through an audit went, 'Oh, I guess I should be do- ing it this way,'" she said. "It was one of those, 'It's always been done that way.' 'It's how I was taught to do it.' But maybe it wasn't necessarily the right way." News Prepare by implementing good internal controls from AUDITS on page 3 Published 12 times a year by Thomson Reuters Canada Ltd. 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No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, photocopying, recording or otherwise without the written permission of the publisher (Thomson Reuters, Media Solutions, Canada). Return Mail Registration # 1522825 | Return Postage Guaranteed Paid News Revenue Toronto Canadian Payroll Reporter is part of the Canadian HR Reporter group of publications: • Canadian HR Reporter — www.hrreporter.com • Canadian Occupational Safety magazine — www.cos-mag.com • Canadian Safety Reporter — www.safety-reporter.com • Canadian Employment Law Today — www.employmentlawtoday.com • Canadian Labour Reporter — www.labour-reporter.com • Canadian Payroll Reporter — www.payroll-reporter.com Payroll professionals should approach the audit process as an educational opportunity.

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