You Have Been Working on the Audit of Ballistic Defence

question 47

Essay

You have been working on the audit of Ballistic Defence Company for several years now.There are about 15 000 employees working at the company in various positions.
Recently,the company contracted for a new customized payroll system,which is to be implemented next month.You have been asked to assess the acceptance testing plan that is being prepared by accounting staff.In particular,they want you to help assess controls that will improve the accuracy of information entered into the new computer system.
The company uses mainframe computing systems.Assume that the typical payroll information is available on computer files (i.e. ,employee number,employee name,social insurance number,department code,payment type code (salaried or hourly),time worked,wage rate,gross pay,deductions (by type),net pay,and cheque number).
Required:
Identify the tests that should be conducted by the company's accounting staff with respect to accuracy before accepting the software.

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Definitions:

Price Skimming

Setting the price of a new product higher than expected to recover development costs.

Penetration Pricing

Setting the price of a new product lower than expected to gain fast market share.

Development Costs

Development costs are expenses associated with the creation and design of new products or services, including research and development.

Breakeven Point

The level of production or sales at which total costs equal total revenue, meaning no net loss or gain is incurred.