Which of the Following Audit Procedures Would Be the Most

question 56

Multiple Choice

Which of the following audit procedures would be the most effective in testing for nonexistent employees?

• A) Trace transactions recorded in the payroll journal to the human resources department to determine employment status.
• B) Examine cancelled checks for proper endorsement.
• C) Recalculate net pay.
• D) Reconcile the disbursements in the payroll journal with the disbursements on the payroll bank statement.

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Definitions:

Implicit Costs

The opportunity costs associated with a company's own resources, not directly paid for with cash but are the result of using assets instead of investing them elsewhere.

Economic Profit

The difference between total revenue and the total costs, including both explicit and implicit costs, unlike accounting profit which only considers explicit costs.

Explicit Costs

Direct financial payments made to acquire resources or services for business operations.

Total Economic Costs

The sum of explicit and implicit costs representing the total resources expended in the production of goods or services.