Which of the Following Is the Best Reason Why an Auditor

question 52

Multiple Choice

Which of the following is the best reason why an auditor should consider observing an entity's distribution of regular payroll checks?

• A)To ensure that names on the company payroll are those of bona fide employees presently on the job.
• B)Total payroll costs are a significant part of total operating costs.
• C)The auditor did not observe the distribution of the entire regular payroll during the audit in the prior year.
• D)Employee turnover is excessive.

---

Definitions:

Tax Liability

The total amount of taxes owed by an individual, company, or other entity to a taxing authority.

Income Tax Expense

The amount charged against a company's profits due to income taxes, reflecting the cost of complying with jurisdictions' tax laws.

Capital Lease

A lease agreement in which the lessee records the leased asset as if it was purchased with financing, reflecting it on their balance sheet.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.