Which of the Following Is the Best Reason Why the Auditors

question 46

Multiple Choice

Which of the following is the best reason why the auditors should consider observing a client's distribution of regular payroll checks?

• A)Separation of payroll duties is less than adequate for effective internal control.
• B)Total payroll costs are a significant part of total operating costs.
• C)The auditors did not observe the distribution of the entire regular payroll during the audit in the prior year.
• D)Employee turnover is excessive.

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Definitions:

Finished Goods

Products that have completed the manufacturing process but have not yet been sold or distributed to the end user.

Indirect Materials

Materials used in the production process that are not directly traceable to individual products or are not cost-effective to trace, such as lubricants and cleaning supplies.

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities and maintenance expenses.

Overapplied

A term used when the estimated costs, such as overhead, allocated to a product or project exceed the actual costs incurred.