Question

Which of the following is a major balance-related audit objective in testing payroll liabilities?

1) Payroll tax expense is properly recorded.
2) Transactions in the payroll and personnel cycle are recorded in the proper period.
3) Accrual of salaries is the same as the amounts paid on the payroll tax returns.
4) Time records are recorded by supervisors

Answer 1

The major balance-related audit objective related to payroll liabilities is ensuring that transactions in the payroll and personnel cycle are recorded in the correct period. This relates closely to the proper recording of payroll taxes and adherence to tax regulations.

Step-by-step explanation:

The major balance-related audit objective in testing payroll liabilities is to ensure that transactions in the payroll and personnel cycle are recorded in the proper period. This means auditors focus on verifying that the accrual of salaries matches the amounts reported and paid on the payroll tax returns and that payroll expenses and liabilities are recorded in the correct accounting period.

Payroll taxes are a critical part of this process. Employers must subtract the right amount from their employees' wages for taxes and then remit these taxes to the appropriate governmental authorities. Ensuring that payroll tax expenses are recorded accurately and in the period in which the salaries are earned is essential for adherence to tax laws and generally accepted accounting principles.

Ultimately, ensuring that payroll transactions are reflected correctly in financial statements provides assurance that the company is compliant with tax regulations and that its financial position is reported correctly.