Management Compensation That Is Tied to Profits May Contribute to Incentives

question 12

True/False

Management compensation that is tied to profits may contribute to incentives to commit fraud.

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Definitions:

Direct Labor

The wages and benefits for employees who are directly involved in the production of goods or the provision of services.

Planning Budget

A budget created for a specific level of activity; it can be adjusted over time to reflect actual business conditions.

Administrative Expenses

Costs associated with the general administration of a business, including office supplies and salaries of non-production staff.

Planning Budget

A forecast of revenue, expenses, and cash flow used by organizations to plan for the upcoming period.