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ACCA Applied Knowledge · Business and Technology · Regulation and financial crime

Which control is most likely to prevent a payroll clerk from creating a fictitious employee and diverting the salary to their own bank account?

Segregating duties, so the clerk cannot both set up employees and process payments, with HR independently approving new starters, best prevents ghost employee fraud. It removes the opportunity for one person to create and pay a fictitious worker. Audits and total comparisons only detect problems later, if at all.

  1. AAnnual external audit of the financial statements
  2. BSegregation of duties so that the person who sets up employees does not also process and authorise payments, with HR approving new startersCorrect
  3. CUse of a longer password for the payroll system
  4. DReviewing the payroll total against last year's total

Explanation

Ghost employee fraud relies on one person controlling both the creation of records and the payment. Segregation of duties, with independent HR authorisation of starters, removes that opportunity. An annual audit is detective and infrequent, and a year-on-year total comparison may not reveal a small addition.

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