Question

Verification of the legitimacy of year-end unpaid bonuses to officers and employees can be accomplished by comparing the recorded accrual to the amount?

1) in the expense account.
2) used in the prior period.
3) authorized in the minutes of the board.
4) paid in the subsequent period.

Answer 1

The legitimacy of year-end unpaid bonuses can be verified by comparing the recorded accrual to the amount authorized in the minutes of the board, which serves as the official record of approved compensation.

Step-by-step explanation:

Verification of the legitimacy of year-end unpaid bonuses to officers and employees can be accomplished by comparing the recorded accrual to the amount authorized in the minutes of the board. This is because the minutes typically will detail the bonus arrangements approved by the board, serving as an authoritative reference for what should have been recorded as an accrued expense. When Noel identified an overpayment on an equipment bill, they took necessary steps to prevent the mistake by alerting the accounting department and potentially involving the right channels to rectify the error, which reflects good internal control practices and the principles of effort and compensation. Similarly, for unpaid bonuses, the verification process should ensure that the recorded amounts align with the established approval as noted in the board minutes to reflect accurate compensation for effort and costs incurred.