A company's payroll process involves calculating gross pay, deducting tax and other amounts, and paying employees. Which of the following is the most effective control to prevent payments to fictitious employees?

Correct answer: A) Requiring the HR department, not payroll staff, to authorise additions to the employee master file

Explanation

Segregating the authority to add new employees (HR) from the processing of pay (payroll) prevents a payroll clerk from creating and paying a fictitious 'ghost' employee. Arithmetic checks do not detect fictitious names, bank transfers can be made to a fraudster's account, and month-on-month comparisons would not detect a small, consistent fraud.