A combination of the following steps will help prevent and detect payroll fraud:

• Segregation of duties at all times — separate payroll preparation, authorization and distribution functions.
• Monitoring payroll records for unusual "accounting" adjustments, such as excessive payments without deductions, large payroll reversals near year-end, etc.
• Minimal use of cheque payments and increased use of payments by direct deposit.
• Monitoring payroll records for duplicate names/addresses or postal codes, incorrect identification numbers and other anomalies.
• Separate segregation and oversight of amendments made to payroll master files, such as direct deposit details, to prevent unauthorized changes.
• Conducting surprise audits to ensure, for example, that all employees on a payroll exist and have an employee file.
• Reconciliation and independent reporting of variations in payroll expense month to month, quarter to quarter with supporting documents as well as comparing current payroll levels to prior years.
• Conducting thorough pre-employment reference checks for all payroll administrators to identify previous fraudsters.
• Reconciling payroll expense and the actual amounts paid to the authorized payroll on a regular basis, and conducting immediate follow-up whenever discrepancies are identified.