An Auditor Most Likely Would Extend Substantive Tests of Payroll

question 58

Multiple Choice

An auditor most likely would extend substantive tests of payroll when

• A)Payroll is extensively audited by the state government.
• B)Payroll expense is substantially higher than in the prior year.
• C)Overpayments are discovered in performing tests of controls.
• D)Employees complain to management about too much overtime.

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Definitions:

Financial Statements

Formal records that detail the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Proposed Transactions

Potential future financial activities or deals that are being considered but have not yet been executed or finalized.

Interim Statements

Financial reports prepared and presented for periods shorter than a fiscal year, such as quarterly or monthly financial statements.

Prepaid Rent

An expense account that represents rent payments made in advance of the rental period, treated as an asset on the balance sheet until the period to which it relates passes.