Which internal control method requires employees to show identification before getting paid, also known as stopping phantom employees?

The correct answer is physical payouts. This internal control method is designed to enhance the integrity of the payroll process by requiring employees to present identification before they receive their pay. By implementing this control, an organization can effectively reduce the risk of paying phantom employees—individuals who are on the payroll records but do not actually work for the company.

Physical payouts ensure that only those who have properly verified their identity can access their wages, which strengthens the overall payroll system. This method serves as a deterrent against fraudulent activities and contributes to accurate payroll reporting by ensuring that payments are made solely to legitimate employees.

In contrast, other methods like job rotation, system edits, and verifying have different purposes. Job rotation primarily aims to reduce the risk of fraud by changing employee duties to prevent any single employee from having control over all aspects of a transaction, while system edits typically refer to automated checks within payroll software to ensure data accuracy. Verifying may involve checking employee details or records but does not specifically address the physical presence of employees during payout.