During a Payroll Audit of a Large Organization, an Auditor

question 21

Multiple Choice

During a payroll audit of a large organization, an auditor noted that the assistant personnel director is responsible for many aspects of the computerized payroll system, including adding new employees in the system; entering direct-deposit information for employees; approving and entering all payroll changes; and providing training for system users. After discussions with the director of personnel, the auditor concluded that the director was not comfortable dealing with information technology issues and felt obliged to support all actions taken by the assistant director. The auditor should:

• A) Continue to follow the engagement program because the engagement scope and objectives have already been discussed with management.
• B) Review the engagement program to ensure testing of direct deposits to employee bank accounts is adequately covered.
• C) Recommend to the chief audit executive that a fraud investigation be started.
• D) Test a sample of payroll changes to ensure that they were approved by the assistant director before being processed.

---

Definitions:

Monopolistic Competitors

Firms that have many competitors but distinguish themselves through product differentiation, allowing them some control over their prices.

Average Total Cost Curves

A graphical representation showing the average cost per unit of output at different levels of production.

Monopolistic Competitor

A firm operating in a market with many competitors but differentiating its product or services from others, thus having some degree of market power.

Price Discrimination

A strategy where a company sells the same product at different prices to different customers, not based on costs but typically on willingness or ability to pay.