Providence, CPA, is engaged in the December 31, Year 2, audit of Bedside Inc. Bedside Inc. is a nonissuer in the medical sales industry. The company was founded by Jude Dean, M.D., and is backed by a number of venture investors. Bedside is a new player in the medical sales industry and as of Year 2, Bedside sells the following: medical devices, surgical devices, and diagnostic imaging equipment.

As part of the payroll analytical procedures, the auditor needs to evaluate the significance of the differences between the recorded payroll amounts, as presented in the Selected Financial Information table below, and the expected values calculated by the auditor. The tolerable misstatement has been set at $10,000. The exhibits above include documents the auditor has gathered to aid in performing these analytical procedures, including the following:

Wages and Salaries Year 1

New Hire Report Year 2

Year 2 Salaries and Wages Policy

Year 2 Bonuses E-mail

Health Insurance Premium E-mail

Use this information to complete the auditor's evaluation of the payroll expense accounts.

Selected Financial Information Salaries and wages expense Bonus expense Payroll tax expense Health insurance expense Year 2 $720,000 361,500 166,750 55,000 Year 1 $549,000 240,000 120,700 40,000 Significant Difference Between Actual and Expected? Auditor's Expectation Expense Account Salaries and wages expense 3 Bonus Bonus expense 4 Payroll tax expense 5 Health insurance expense Wages and Salaries Year 1 Bedside Inc. As of 12/31/41 Employee Name D. Dan T. Jack G. Gabriella R. Ted P. Kate C. Meng I. Jose Total Employee ID Sales Rep Type 000009110 Medical Device 000008818 Surgical Device 000074565 Medical Device 000003838 Diagnostic Imaging 000009292 Surgical Device 000044949 Diagnostic Imaging 000022828 Surgical Device Hire Date 1/1/Y1 1/1/41 1/1/Y1 1/1/Y1 1/1/41 1/1/41 1/1/Y1 Base Salary / Performance Wage Year 1 Rating Year 1 $ 83,000 $ 79,000 3 $ 83,000 $ 73,000 $ 79,000 $ 73,000 $ 79,000 $ 549,000 New Hire Report Year 2 Bedside Inc. 1/1/Year 2 - 12/31/Y2 Hire Employee ID Effective Date Sales Rep Type Base Salary / Wage Year 000007667 7/1/Y2 Medical Device $ 83,000 Employee Name and Address Udell, Rose 224 Pine Ln Providence, RI 02901 Montez, Jade 123 Foxhill Ave Providence, RI 02904 Owens, Karla 558 Brown Ave Providence, RI 02901 000009986 7/1/Y2 Surgical Device $ 79,000 000088776 7/1/Y2 Surgical Device $ 79,000 Year 2 Salaries and Wages Policy Memo To: All Medical Sales Employees From: Robert Jones, Human Resources Date: January 1, Year 2 Subject: YEAR 2 SALARY AND WAGES POLICY Dear Medical Sales Professionals, Annual performance reviews and compensation discussions for Fiscal Year I were held during the month of December, Year 1. As discussing during your individual compensation meeting, your Fiscal Year 1 performance will directly affect your salary base for Year 2 as follows: Base Increase 7% Performance Rating Rating Category Top Performer High Performer Average Performer Needs Improvement 5% Please reach out to myself or your department managers if there are any questions regarding compensation. If you were hired prior to 1/1/Y2, your new base salary will be effective March 1, Year 2. New hires' compensation rates are effective as of hire date. Sincerely, Robert Jones, Human Resources