During the Current Year Being Audited, Hitech, Inc

question 55

Multiple Choice

During the current year being audited, Hitech, Inc. changed from a conventional payroll punch clock to a computerized payroll time system. Factory employees now record time in and out with magnetic cards and the IT system automatically updates all payroll records. Because of this change:

• A)the auditor must audit through the computer.
• B)internal control has improved.
• C)without paper clock cards, part of the audit trail has been altered.
• D)the potential for payroll related fraud has been diminished.

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Definitions:

Times Interest Earned Ratio

A financial metric used to measure a company's ability to meet its debt obligations, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Debt-To-Equity Ratio

A ratio demonstrating the balance between shareholder equity and debt in funding a company's assets.

Return On Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company uses its equity investment.

Price/Earnings Ratio

A valuation metric for stocks calculated by dividing the market price per share by the earnings per share, indicating how much investors are willing to pay per dollar of earnings.