No having to rely on samples allowed us to perform audits more efficiently and effectively. The audit results were more easily defendable (no arguments about the representativeness of the sample and the validity of the extrapolation). It also supported better coverage and more comprehensive audits.
Vacation audit – the company allowed employees to carry forward vacation days – but different unions had negotiated different amounts. Depending on the union to which they belonged, some employees were only allowed to carry forward one year’s worth of vacation credits while others were allowed to carry forward up to five year’s worth. As part of an audit of vacation leave, the VP of Finance was interested in determining the liability (vacation days * daily pay rate) and if employees were carrying more vacation days than permitted.
Using HR data, we were able to determine the union and years of service – which gave us the vacation entitlement. The calculation was a little complex because the vacation entitlement depended on years of service and the union to which the employee belonged. Next, we calculated the balance (entitlement – usage) for each employee. Finally, we calculated the liability (Balance * daily salary rate).
The analysis identified a large number of employees who were carrying more than the maximum vacations days they were allowed and determined that the financial liability had been significantly understated.
Continue reading Year 21 – 2008 – part 2 – Payroll and Vacation