In Determining the Effectiveness of an Entity's Policies and Procedures

question 49

Multiple Choice

In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and

• A) Observe the segregation of duties concerning human resource responsibilities and payroll disbursement.
• B) Inspect evidence that all prenumbered payroll checks are accounted for.
• C) Recompute the payroll deductions for employee fringe benefits.
• D) Verify the preparation of the monthly payroll account bank reconciliation.

---

Definitions:

Implicit Costs

The opportunity costs associated with a company's use of resources that it owns, representing the potential income lost by not using those resources in an alternative way.

Total Revenues

The overall sum of money earned by a business from its sales of goods or services, calculated without deducting any expenses.

Marginal Product

The incremental increase in output resulting from the use of one additional unit of a resource, while keeping other resources constant.

Variable Resource

A factor of production whose quantity can easily be changed in the short term to increase or decrease production levels.