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.

Question

Quizplus · Accepted Answer

The discovery of overpayments during tests of controls indicates that the payroll system may not be functioning properly, which increases the risk of material misstatements in payroll. Therefore, the auditor would extend substantive tests of payroll to ensure that there are no material misstatements in payroll. The other options do not necessarily indicate that there is an increased risk of material misstatements in payroll, and therefore, do not require an extension of substantive tests.

An Auditor Most Likely Would Extend Substantive Tests of Payroll