A Common Audit Procedure in the Audit of Payroll Transactions

question 71

Multiple Choice

A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel.This procedure is designed to provide evidence in support of the audit proposition that:

• A)Only bonafide employees worked and their pay was properly computed.
• B)Jobs on which employees worked were charged with the appropriate labor cost.
• C)Internal control relating to payroll disbursements are operating effectively.
• D)Employees worked the number of hours for which their pay was computed.

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Definitions:

Operating Costs

Operating costs, or operating expenses, are the costs required for the day-to-day maintenance and administration of a business.

Financial Position

The status of a company or individual's assets, liabilities, and equity at a specific point in time, summarizing the economic resources and obligations.

EBIT

Earnings Before Interest and Taxes - a measure of a firm's profitability that excludes interest and income tax expenses.

Accounts Payable

Accounts Payable is the amount of money a company owes its suppliers for goods or services received but not yet paid for.