There is usually a disconnect between the database containing employee timekeeping records and the payroll processing software. Typically, the payroll staff manually transfers total hours worked for each hourly employee from a timekeeping database into the payroll processing software. When this happens, there is a significant risk of incorrect data entry. Given the size of some payrolls, this risk would likely be flagged by a Sarbanes-Oxley controls review.
While an automated interface is the best way to resolve this risk, it is not a viable option for most companies. Instead, they should use a formal reconciliation of the time listed in the database to the time entered in the payroll processing software.
This is a two-way comparison. First, the payroll manager (not the person who did the data entry) should compare the hours listed in the timekeeping database for hourly employees to the totals listed in the preliminary payroll register, and physically sign off on the register if it is correct. This review is designed to catch data entry errors.
In addition, she should conduct a reverse comparison, where she traces all payments to hourly employees on the payroll register back to the timekeeping records. By doing so, she is ensuring that the data entry person is not paying a "ghost" employee for whom there are no records in the timekeeping database. Thus, the first reconciliation spots data entry errors, while the second reconciliation locates instances of fraud.