An Auditor Most Likely Would Perform Substantive Procedures on Payroll

question 99

Multiple Choice

An auditor most likely would perform substantive procedures on payroll transactions and balances when

• A)cutoff tests indicate a substantial amount of accrued payroll expense.
• B)the assessed level of control risk relative to payroll transactions is low.
• C)analytical procedures indicate unusual fluctuations in recurring payroll entries.
• D)accrued payroll expense consists primarily of unpaid commissions.

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Definitions:

Current Ratio

A financial ratio indicating a firm's capacity to settle its short-term liabilities with assets that can be easily converted into cash within a year.

Total Current Assets

The total value of all assets that a company expects to convert into cash within one year, including cash, inventory, and accounts receivable.

Total Current Liabilities

The sum of all liabilities of a company that are due within one year, including accounts payable, short-term loans, and other short-term financial obligations.

Assets

Resources owned by a person or business that have economic value and can provide future benefits.