1. Mitchell seems apprehensive about the bonus system operated by Lakeside. In gathering evidence as to the fair presentation of financial statements, why would an auditor be concerned by such a profit- sharing arrangement?
2. Since Mitchell is now planning substantive test, the testing of controls within the payroll system has apparently been completed. This step in the audit process seeks to ascertain that control policies and procedures are operating effectively. What specific test of controls C might Mitchell have performed in evaluating this payroll system?