In comparing total employee benefits expense with that of the preceding year, Marilyn Brendin, public accountant, observed a significant increase, even though the total number of employees had increased only from 175 to 195. To investigate the difference, she selected a large sample of payroll disbursement transactions and carefully tested the withholdings for each employee in the sample by referring to Canada Pension Plan, employment insurance, and other benefits withholding tables. In her test, she found no exceptions; therefore, she concluded that employee benefits expense was fairly stated.
REQUIRED
a. Evaluate Brendin’s approach to testing employee benefits expense.
b. Discuss a more suitable approach for determining whether employee benefits expense was properly stated in the current year.