Sample Total Rewards Audit Procedures

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Total Rewards Audit Procedures: <Company Name>

Document Type	Total Rewards Audit Procedures
Category	Compliance & Governance
Company	<Company Name>
Version	v<Version Number>
Effective Date	<Effective Date>
Last Review Date	<Last Review Date>
Next Scheduled Review	<Next Review Date> (every <Frequency, e.g., 12 months>)
Document Owner	<Head of Total Rewards or Title>
Approver(s)	<CHRO>; <Chief Compliance Officer>; <Internal Audit>
Confidentiality	Internal Use Only

Document Purpose and Objectives

Define consistent, repeatable procedures for auditing Total Rewards programs at <Company Name> across all geographies and entities
Provide control objectives, test steps, sampling methods, and documentation standards aligned with industry best practices
Ensure compliance with applicable laws, regulations, plan documents, and internal policies
Identify control gaps and risks impacting pay equity, benefits compliance, payroll accuracy, financial reporting, and employee experience
Enable evidence-based remediation, continuous improvement, and transparent reporting to governance bodies

Scope and Applicability

In Scope
- Base pay administration, variable pay, sales incentives, equity compensation (RSUs, options, ESPP), recognition, allowances, benefits, leaves, and mobility-related rewards
- Global payroll interfaces and shadow payroll where applicable
- Vendor-managed benefits and third-party administrators
- Data flows among HRIS, payroll, equity platforms, benefits administration, timekeeping, and accounting systems
- Compliance with statutory obligations in <Country> and other operating jurisdictions
Out of Scope
- Non-compensation internal audits unrelated to Total Rewards
- Investigations governed by separate ethics or legal protocols unless referred
- Detailed IT general controls testing beyond interfaces and access relevant to Total Rewards
Applicability
- Applies to all employees of <Company Name> inclusive of full-time, part-time, temporary, interns, and contingent workers where local law or policy includes them in a reward program
- Applies to all subsidiaries and joint ventures where <Company Name> holds operational control

Governance and Principles

Audit Philosophy

Risk-based coverage prioritizing higher-risk geographies, programs, and transactions
Independence of testing from day-to-day administration where practicable
Proportionality of testing effort to materiality and risk impact
Documentation sufficiency to allow a knowledgeable reviewer to re-perform and reach the same conclusion

Ethical Standards and Confidentiality

Protect PII and PHI under applicable laws (e.g., GDPR in <Country or Region>, HIPAA in <Country>)
Limit data access to least privilege; use secure storage and transfer solutions approved by <Security Team Name>
Do not retaliate against employees participating in audits or raising concerns in good faith
Coordinate with Legal for holds and preservation when relevant to litigation or investigations

Roles and Responsibilities

Total Rewards (TR) Operations
- Provide process documentation, data extracts, and evidence
- Execute remediation actions within agreed timelines
TR Governance/Compliance
- Own this procedure, maintain control inventory, coordinate testing, track issues
Internal Audit
- Provide independent oversight, challenge risk assessments, and perform or validate testing for high-risk areas
Payroll
- Provide pay registers, adjustments, tax filings, reconciliations, and support for payroll-related tests
Finance/Accounting
- Validate accruals (bonuses, commissions, stock comp), account reconciliations, and financial statement assertions
Legal/Privacy
- Advise on regulatory requirements, cross-border data transfers, and data minimization
HRIS/IT
- Manage access controls, integrations, change management, and logging
Vendors
- Provide SOC reports, SLAs, control attestations, and support sample testing as contractually required

Audit Framework Overview

Audit Lifecycle Steps

Annual risk assessment and audit plan approval by <Governance Committee Name>
Engagement planning and scoping memo with defined objectives, timelines, sampling, and stakeholders
Walkthroughs and documentation of processes, risks, and controls (RACM)
Data acquisition, validation, and scoping of populations
Control testing and substantive procedures per this document
Issue rating, root cause analysis, and management action plans
Reporting of results to management and governance forums
Remediation validation and closure
Lessons learned and continuous improvement updates to procedures

Annual Planning Artifacts

Risk heat map covering domains: compensation, benefits, equity, payroll, vendors, compliance filings, leave
Multi-year rotation schedule for low-to-moderate risk areas; annual coverage for high-risk areas
Expected effort hours, resource plan, and coordination with Internal Audit calendar
Regulatory change impact assessment for <Year> (e.g., new pay transparency laws in <Country/State>)

Risk Assessment and Materiality

Risk Categories and Examples

Strategic resulting from misaligned pay programs harming talent outcomes
Operational such as incorrect pay calculations, missed deadlines, or data interface failures
Compliance/Legal including non-compliance with wage laws, benefits regulations, tax requirements, or plan documents
Financial Reporting misstatements in compensation-related accruals or expense recognition
Reputational adverse employee experience, media, or regulator attention

Materiality Guidelines

Quantitative: testing thresholds for errors of <Amount> or <Percentage> of total population value
Qualitative: items impacting legal compliance, protected classes, executive pay, or board reporting are material regardless of value
Example calibration for annual cycle:
- Payroll accuracy: flag variances greater than <Percentage, e.g., 0.5%> of total payroll or <Amount, e.g., <Amount>>
- Equity grants: any deviation from board-approved guidelines is material
- Benefits eligibility: errors affecting coverage or claims are material

Issue Severity and Priority

Severity	Description	Typical SLA
High	Legal breach, financial misstatement risk, or broad employee harm	Remediate within <30-60 days>
Medium	Control weakness with limited impact or compensating controls present	Remediate within <60-90 days>
Low	Process efficiency or documentation improvements	Remediate within <90-120 days>

Controls Inventory and Control Objectives

Compensation Administration

Ensure base pay, bonuses, sales incentives, and spot awards are authorized, calculated correctly, and compliant with policy and law
Control objectives include proper approvals, segregation of duties, audit trails, and adherence to pay ranges and plan rules

Benefits and Leaves

Ensure eligibility, enrollment, contributions, and employer funding comply with plan documents and laws
Ensure leave accrual, usage, and pay replacement follow policy and statutory requirements

Payroll and Timekeeping

Ensure gross-to-net pay accuracy, tax withholdings, remittances, filings, and timely payments
Validate time capture accuracy, overtime compliance, and treatment of non-exempt vs exempt classifications

Equity Compensation

Ensure grants align with board approvals, vesting schedules, and tax reporting
Validate accounting under <IFRS/ASC> and withholding compliance in <Country>

Vendor and Third-Party Management

Ensure SOC reports are reviewed, SLAs are monitored, and interfaces are reconciled
Validate fees, eligibility decisions, and data security obligations

Regulatory Filings and Reporting

Ensure accurate and timely filings such as <Country-specific filings>, <Statements>, and required disclosures

Data Sources and Access Management

Systems of Record and Key Feeds

HRIS: <System Name> as the source for employee master data
Payroll: <Payroll System Name> for pay registers and tax reporting
Equity: <Platform Name> for grants, vesting, and tax events
Benefits: <Vendor Name> platform for eligibility, enrollment, and billing
Timekeeping: <System Name>
Accounting/ERP: <ERP Name> for accruals and expense postings

Data Access and Retention

Provision access using least privilege with approvals by <Data Owner> and <Security>
Retain audit workpapers for <Retention Period, e.g., 7 years> or longer if required by <Country> law
Encrypt data at rest and in transit using <Encryption Standard>

Sampling Methodology

Sampling Approaches

Random sampling for homogenous populations
Stratified sampling by country, job level, pay group, or transaction type
Judgmental sampling for rare or high-risk items (e.g., executive rewards, terminations with severance)
Attribute sampling for pass/fail controls and variables sampling for amount-based tests

Sample Sizes and Parameters

Default attribute sample size: <Sample Size, e.g., 25> per control per period unless population is small
Variables sampling: tolerate misstatement of <Percentage or Amount> with confidence of <Confidence Level, e.g., 95%>
For populations under <N, e.g., 100>, test either 100% or a minimum of <Sample Size> high-risk items

Population Definition and Validation

Reconcile populations to system reports or general ledger totals before sampling
Document inclusions and exclusions and any filters applied

Detailed Audit Procedures by Domain

1. Base Pay and Job Data

Control Objectives
- Pay changes are approved, within range, and effective on correct dates
- Job codes, grades, and FLSA status are accurate
Procedures
- Obtain population of pay changes during <Period> and sample using defined methodology
- For each sample, verify approval evidence by <Approver Title>, effective date in HRIS, and compensation letter or system record
- Validate new pay against salary structure; investigate exceptions above <Percentage, e.g., 10%> increase without exception approval
- Cross-check FLSA or local classification against job duties and local law in <Country>
- Reconcile headcount and base pay totals to general ledger and payroll
Common Red Flags
- Retroactive changes without approvals
- Frequent off-cycle adjustments
- Inconsistent job leveling across business units

2. Variable Pay and Bonus Programs

Control Objectives
- Eligibility, targets, and payouts follow plan documents
- Funding aligns with approved metrics; calculations are accurate
Procedures
- Obtain plan document for <Plan Name> and funding approval by <Committee Name>
- Test calculation logic for a sample of <Sample Size> payouts; recompute using source performance data
- Confirm pro-ration rules for hires, leaves, and transfers
- Verify accounting accruals and reversals in <Ledger Account> tie to payouts
- Check cap and floor rules, rounding, and currency conversions
Examples
- Flag differences above <Percentage, e.g., 2%> or <Amount> between calculated and paid

3. Sales Incentives and Commissions

Control Objectives
- Territory, quota, crediting, and rate tables are controlled and documented
Procedures
- Sample crediting adjustments and verify approvals and audit trails
- Recalculate commissions for sample participants using rate tables and eligible revenue from <CRM System>
- Trace disputes to resolution and timeliness metrics
- Validate draw and clawback application and tax treatment in <Country>

4. Equity Compensation

Control Objectives
- Grants match board approvals; vesting and tax are proper
Procedures
- Reconcile approved grant list to uploaded grants in <Equity Platform>
- For sampled grants, verify grant price, shares, vesting, and participant eligibility
- Test withholding and reporting for taxable events; verify remittance deadlines
- Confirm accounting under <ASC 718/IFRS 2> with Finance; reconcile expense to ledger
- Review modification events and documentation

5. Benefits Eligibility, Enrollment, and Billing

Control Objectives
- Eligibility is timely and accurate; contributions align to plan documents
Procedures
- Reconcile HRIS eligibility files to vendor enrollments for <Month/Quarter>; investigate mismatches
- Test evidence of qualifying life events and effective dates per <Country> rules
- Recalculate employee and employer contributions for sampled payroll cycles
- Reconcile vendor invoices to enrollment and payroll deductions; validate credits and retro adjustments
- Review evidence of annual SOC reports from <Vendor Name> and control exceptions

6. Leaves and Time Off

Control Objectives
- Leave eligibility, accrual, and pay comply with law and policy
Procedures
- Sample leave cases and verify documentation, approvals, and notification timelines
- Recalculate accruals and balances; test carryover and forfeiture rules
- Validate pay replacement under statutory programs in <Country> and coordination with employer top-up

7. Payroll Accuracy and Tax Compliance

Control Objectives
- Accurate gross-to-net, timely remittances, and filings
Procedures
- Reconcile payroll registers to GL postings by pay period; review suspense accounts
- Sample pay elements and recompute tax and benefit deductions; verify wage caps and limits
- Confirm payment timeliness and filing acknowledgments for <Country/State> agencies
- Test off-cycle payments, reversals, and negative net scenarios for appropriate approvals
- Validate year-end reporting (e.g., <Forms/Statements>) to cumulative payroll data

8. Recognition, Allowances, and Perquisites

Control Objectives
- Awards and allowances are approved, taxed appropriately, and policy-compliant
Procedures
- Sample awards from <Platform Name>; verify policy alignment and taxability treatment
- Review auto, housing, meal, and education allowances; confirm rates, approvals, and gross-up rules
- Test imputed income calculations for taxable benefits in <Country>

9. Mobility and Shadow Payroll

Control Objectives
- Tax equalization and shadow payroll are accurate and timely
Procedures
- Sample assignee files; validate cost-of-living, hardship, and per diem allowances
- Verify shadow payroll postings in host country for equity events and bonuses
- Confirm compliance with social security totalization and treaty positions

10. Vendor Management and Data Interfaces

Control Objectives
- Vendors meet service and control commitments; interfaces are complete and accurate
Procedures
- Obtain and review current SOC 1/2 reports; document complementary user entity controls
- Validate interface control totals between systems; reconcile rejects and reprocessing
- Review incident logs, service credits, and SLA performance against <Contract ID>

Use of Analytics and Automated Testing

Recommended Analytics

Duplicate payment detection across payroll cycles
Variance analysis by pay group and country beyond <Threshold Percentage>
Outlier detection of pay changes vs. market range and performance ratings
Eligibility mismatches between HRIS and vendor files
Equity vesting and tax anomalies around blackout periods

Data Quality Checks

Mandatory field completeness for identity, grade, pay rate, and status
Valid code sets for job, location, and departments
Date logic (effective date ordering, no future-dated payments unless expected)

Documentation Standards and Evidence

Working Papers Must Include

Objective, scope, population definition, sampling method, and sample rationale
Control descriptions and links to policy or plan documents
Detailed test steps and tickmarks
Evidence copies or secured references to system reports, screenshots, or logs
Results, exceptions, root cause analysis, and impact
Management action plans with owners and target dates

Evidence Acceptability Criteria

Legible, complete, and from authoritative sources
Tied to unique identifiers (employee ID, transaction ID)
Re-performable calculations with source references

Issue Management and Remediation

Issue Lifecycle

Document issue with clear condition, criteria, cause, consequence, and corrective action
Rate severity and priority per materiality guidance
Assign owner and target remediation date
Track progress and validate closure with new evidence
Monitor for recurrence in subsequent cycles

Root Cause Categories

Policy design gap, inadequate procedures, training gap, system configuration, access control, change management, vendor error, manual process risk

Reporting and Governance

Deliverables

Planning memo
RACM (Risk and Control Matrix)
Audit report with executive summary, detailed findings, and management responses
Board or committee packet with metrics and heat map
Remediation validation memo

Key Metrics (Examples)

Payroll first-pass accuracy > <Percentage, e.g., 99.5%>
Benefits enrollment match rate > <Percentage>
On-time vendor SOC review completion > <Percentage>
Average remediation days by severity

Legal and Regulatory Considerations

Regulatory Reference Examples

Pay equity and transparency laws in <Country/State>
Wage and hour regulations in <Country>
Benefits mandates (statutory health, retirement, insured benefits) in <Country>
Data privacy laws (GDPR, <Local Law>)
Securities and tax reporting for equity in <Country>

Note: Engage Legal to confirm applicability by jurisdiction and maintain a regulatory inventory with owners and review cadence.

Review and Approval Process for This Procedure

Version Control

Version	Date	Summary of Changes	Author	Approver
v<Number>	<Date>	Initial release	<Name>	<Name/Title>
v<Number>	<Date>	Updated sampling and equity procedures	<Name>	<Name/Title>

Review Cadence

Minimum annual review or upon significant regulatory or program changes
Interim updates permitted with documented rationale and approvals

Approvals

Draft by Document Owner
Review by TR Leadership and Compliance
Legal/Privacy sign-off where required
Final approval by <CHRO or Committee>

Implementation Guidelines for <Company Name>

Tailoring the Template

Insert <Company Name> roles, system names, and country list
Map your controls to the RACM example and add program-specific controls
Define quantitative materiality thresholds appropriate to your payroll scale
Align with Internal Audit methodology to avoid duplication

Standing Calendar

Period	Activities
Q1	Annual risk assessment, plan approval, benefits vendor SOC reviews
Q2	Base pay and payroll accuracy testing, equity grants review
Q3	Benefits billing reconciliation, leave compliance checks, vendor SLA review
Q4	Variable pay payout testing, year-end reporting, remediation validation

Tools and Enablers

Data extraction guides for <HRIS/Payroll/Equity>
Secure evidence repository with access control by <Tool Name>
Standardized scripts for recalculations and reconciliations

Sample Risk and Control Matrix (RACM) Extract

Risk ID	Risk Statement	Control ID	Control Description	Frequency	Owner	Control Type
C-01	Unauthorized pay changes	CTRL-COMP-01	HRIS workflow requires approval by manager and HRBP before pay effective date	Per Transaction	<Owner Title>	Preventive
P-02	Payroll interface failure	CTRL-INT-02	Interface control totals validated and signed-off before payroll close	Per Pay Cycle	<Owner Title>	Detective
E-03	Equity grants exceed approved pool	CTRL-EQ-03	System-enforced caps and monthly reconciliation to board-approved pool	Monthly	<Owner Title>	Preventive/Detective

Checklists

Pre-Audit Planning Checklist

Confirm audit objectives, scope, and timeline
Identify stakeholders and obtain availability
Validate data sources and extract schedules
Define sampling plans and materiality thresholds
Confirm secure data transfer methods
Communicate audit announcement to impacted teams

Evidence Collection Checklist

Approvals and plan documents
System logs and workflow history
Calculations and reconciliations
Vendor reports and SOC reviews
Regulatory filings confirmations

Glossary of Terms and Definitions

Total Rewards Comprehensive compensation and benefits, including cash, equity, benefits, and recognition
RACM Risk and Control Matrix mapping risks to controls and test plans
PII/PHI Personally Identifiable Information and Protected Health Information
SOC 1/2 Service Organization Control reports on service providers’ controls
FLSA Fair Labor Standards Act or local equivalent in <Country>
ESPP Employee Stock Purchase Plan
RSU Restricted Stock Unit
Imputed Income Taxable value assigned to certain benefits
Shadow Payroll Host country payroll for assignees to meet tax obligations
Materiality Threshold where an error influences decision-making
Compensating Control A control that reduces risk where primary control is weak

Communication to Employees and Managers

What This Audit Means for You

This communication is to let you know that <Company Name> periodically reviews our pay, benefits, and related processes to make sure they are accurate, fair, and compliant with the laws in the places where we operate. These reviews, called Total Rewards audits, help us confirm that employees are paid correctly and on time, benefits are administered as promised, and personal information is protected.

During the audit period, some teams may be asked to share documents, reports, or confirmations. If you receive a request, it will come from the Total Rewards team or a designated partner in Payroll, HR, or Internal Audit. We work to keep requests focused and to minimize disruption to your day-to-day work.

You may notice small changes as we improve our processes, like clearer pay statements, updated benefits enrollment steps, or revised approval workflows. These changes are part of our commitment to continuous improvement and to giving you an excellent employee experience.

Your personal information remains confidential. We only use the minimum data needed and follow strict safeguards approved by our Security and Privacy teams. Audit materials are stored securely, and only authorized personnel can access them.

If you have a question about your pay, benefits, or statements, please reach out to <HR Support Channel>. If you see something that does not look right, please tell us. Reporting concerns helps us fix issues quickly and is protected under our non-retaliation policy. You can raise concerns with <Manager Name>, the HR team, or anonymously through <Hotline Name>.

Here is what to expect:

We plan the audit and let relevant teams know the timeline.
We review processes and data, sometimes asking for clarifications or documents.
We share results with leadership and publish any relevant employee-facing updates.
If we find issues, we fix them and confirm the fixes worked.

Thank you for your cooperation. Our goal is simple: to ensure rewards at <Company Name> are accurate, fair, timely, and compliant, so you can focus on doing your best work and enjoying the rewards you have earned.

Document Information:

Document Type: Total Rewards Audit Procedures
Category: Compliance & Governance
Generated: August 28, 2025
Status: Sample Template
Next Review: <Insert Review Date>

Usage Instructions:

Replace all text in angle brackets < > with your company-specific information
Review all sections for applicability to your organization
Customize content to reflect your company's policies and local regulations
Have legal and HR leadership review before implementation
Update document header with your company's version control information
At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.