Payroll Fraud And Accounting Information Systems

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Payroll Fraud and Accounting Information Systems
Stephanie Ace and Nisha Selvam

Payroll systems have evolved tremendously as software and computerized systems have spread throughout the workplace. While this has alleviated some of the hassle involved with processing payroll, it has also opened up a world of potential issues. Oftentimes, systems that appear both effective and efficient can become vulnerable if placed in the hands of dishonest employees or employers. Ultimately, while accounting information systems have resulted in exponential growth to the payroll system, it is also important to consider the possible weaknesses that lie beneath the surface.

Defining Payroll Fraud

According to a 2012 article from Pay and Benefits Magazine, payroll fraud is defined as “the unauthorized altering of payroll or benefits systems in order for an employee to gain funds which are not due,” (“Payroll Fraud”). This illegal practice takes up a relatively large percentage of an organization’s expenditures. According to a 2014 study by the Association of Certified Fraud Examiners, it is estimated that the typical organization loses 5% of revenues each year to fraud. The average loss due to fraud was $145,000 and the average timeframe that fraud escaped detection for nearly 18 months. In addition, of the cases reviewed, 22% involved amounts above $1 million ("About the Report"). Based on these figures, the importance of preventing and detecting
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