Payroll Data Co

question 244

Multiple Choice

Payroll Data Co. (PDC) processes payroll transactions for a retailer. Cook, CPA, is engaged to express an opinion on a description of PDC's internal controls placed in operation as of a specific date. These controls are relevant to the retailer's internal control, so Cook's report may be useful in providing the retailer's independent auditor with information necessary to plan a financial statement audit. Cook's report should:

• A) Contain a disclaimer of opinion on the operating effectiveness of PDC's controls.
• B) State whether PDC's controls were suitably designed to achieve the retailer's objectives.
• C) Identify PDC's controls relevant to specific financial statement assertions.
• D) Disclose Cook's assessed level of control risk for PDC.

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Definitions:

Perpetual Inventory Method

An inventory management system where adjustments to inventory accounts are made continuously as transactions occur.

Bank Credit Card

A payment card issued by a bank allowing cardholders to purchase goods and services on credit.

Income Statement Relationships

The relationships within an income statement involve how revenues, expenses, and profits interact and affect each other to show a company's financial performance over a period.

Uncollectible Accounts

Accounts receivable that are considered unlikely to be collected and thus are written off as a bad debt expense.