Question

Which of the following errors gives the auditor the least concern in auditing payroll transactions?

1) An error that indicates possible fraud
2) Computational errors in formulas when a computerized system is used
3) Classification errors in charging labor to inventory and job cost accounts
4) Each of the above gives the auditor significant concern.

Answer 1

Among the given options, computational errors in formulas due to computerized systems concern auditors the least because they are systemic and easier to correct, whereas errors indicating potential fraud or classification errors have more serious implications for financial integrity.

Step-by-step explanation:

In the context of auditing payroll transactions, the error that gives the auditor the least concern is computational errors in formulas when a computerized system is used. This is because such errors are likely to be systemic and can be easily identified and corrected. On the other hand, an error that indicates possible fraud would give an auditor significant concern, as it may imply malicious activities and could have broader implications for the integrity of the financial statements. Similarly, classification errors in charging labor to inventory and job cost accounts can lead to misstated financial information and are also a significant concern to auditors. Therefore, the correct answer is that computational errors in formulas are the least concerning.