The most important consideration in evaluating the fairness of the amounts accrued for vacation pay, sick pay, and other benefits is the
A) consistent accrual of these liabilities relative to those of preceding periods.
B) actual expense incurred for the prior period.
C) amount expended to date in the current period.
D) profitability of the client which will enable these liabilities to be met.

Question

Quizplus · Accepted Answer

The most important consideration in evaluating the fairness of the amounts accrued for vacation pay, sick pay, and other benefits is the consistent accrual of these liabilities relative to those of preceding periods. This ensures that the liabilities are being recognized properly and that there is no manipulation of the accruals to achieve a desired financial result. The actual expense incurred for the prior period, amount expended to date in the current period, and profitability of the client are all important factors to consider but they are not the most important consideration when evaluating the fairness of the accruals for these benefits.

The Most Important Consideration in Evaluating the Fairness of the Amounts