The two most important audit procedures for prepayments are:
A) tests of controls and tests of details of balances.
B) tests for reasonableness or plausible relationships using analytical procedures and recalculation.
C) consistency and accounting standards.
D) tests of controls and substantive tests of transactions.

Question

Quizplus · Accepted Answer

The two most important audit procedures for prepayments are tests for reasonableness or plausible relationships using analytical procedures and recalculation. This is because prepayments involve determining whether expenses have been paid in advance and are therefore recorded as assets, and whether the amounts recorded are reasonable and accurate. Analytical procedures help auditors identify any unusual or unexpected patterns or trends in the data, while recalculation involves verifying the arithmetic accuracy of the amounts recorded. Tests of controls and tests of details of balances are also important audit procedures, but they are not specifically tailored to the unique characteristics of prepayments.

The Two Most Important Audit Procedures for Prepayments Are