Inherent risk for the valuation or allocation assertion will be high in the personnel services cycle when:
A) employee turnover is low.
B) factory workers are paid based on production.
C) payroll checks are drawn from a separate imprest bank account.
D) pay periods are weekly.
E) employee absenteeism is minimal.

Question

Quizplus · Accepted Answer

Inherent risk for the valuation or allocation assertion is high when factory workers are paid based on production because this situation increases the complexity of calculating payroll due to the variability in pay, thus increasing the risk of misstatement in payroll expenses.

Inherent Risk for the Valuation or Allocation Assertion Will Be