Question
Which of the following is true with respect to auditing purchases, payables, and payroll? A. The auditor should be aware of pressures to overstate payables
Which of the following is true with respect to auditing purchases, payables, and payroll?
A. The auditor should be aware of pressures to overstate payables in order to report a higher level of working capital in the face of liquidity problems or going concern doubts.
B. The auditor should be aware of contentious accounting issues, such as whether a cost should be capitalized or expensed, that relate to the accuracy and valuation assertion.
C. A major concern for the auditor is that those involved in the payroll process may, in error, underpay employees.
D. When assessing the control environment to determine the control risk, the auditor should be aware that purchasing agents may be subjected to pressures from suppliers, such as offers of kickbacks for doing more business with those suppliers.
E. Because of the materiality of the payables process, the auditor almost always takes a substantive approach.
F. When auditing payroll, the assertion of most concern is occurrence.
G. The level of expenditure both for cost of goods sold and other costs will to some extent be affected by levels of revenue. Therefore, an understanding of the sales cycle can lead to an understanding of an entitys expenditure cycles and help in assessing the possibility of misstatements in these areas.
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