The Auditors Informed the Company That the Provision for Long

question 8

Multiple Choice

The auditors informed the company that the provision for long service leave was understated by $100 000 at 30 June 2019 and that the account should be adjusted. The effect of the adjustment would be:

• A) liabilities increase and profit decreases.
• B) liabilities increase but profit is unaffected.
• C) profit increases but there is no effect on liabilities.
• D) there is no effect on either profit or liabilities.

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Definitions:

Pessimistic Time

The maximum possible time that a task or project phase is expected to take, assuming worst-case scenarios.

Optimistic Time

The shortest amount of time in which a task or project phase can realistically be completed, assuming everything proceeds better than is normally expected.

Crash Duration

The minimum time period needed to complete an activity or project phase by allocating the maximum resources.

Crash Cost

The additional costs associated with rushing or compressing a project schedule to complete it in the shortest time possible.