In the Substantive Audit Procedures for Payroll Where the Control

question 3

Multiple Choice

In the substantive audit procedures for payroll where the control risk is set at low, an auditor most likely would:

• A)verify that checks representing unclaimed wages are mailed.
• B)trace individual employee deductions to entity journal entries.
• C)observe entity employees during a payroll distribution.
• D)compare payroll costs with entity standards or budgets.

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Definitions:

Basic Formula

Typically refers to the accounting equation: Assets = Liabilities + Equity.

Calculating Interest

The process of determining the monetary charge for borrowing money or the return on investment for savings, typically through a predetermined formula.

Note Receivable

A written promise for the payment of a specified amount of money at a set time to the holder or bearer of the note.

Accounts Receivable

Represents money owed to a business by its customers for goods or services delivered but not yet paid for, considered a current asset on the balance sheet.