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 due to company growth.
C) Overpayments are discovered in performing tests of details.
D) Employees complain to management about too much overtime.

Question

Quizplus · Accepted Answer

When overpayments are discovered in the tests of details, it indicates a potential issue with the accuracy of payroll records. Thus, an auditor would extend substantive tests of payroll to identify any other errors or irregularities that may exist. Option A is irrelevant as the fact that payroll is audited by the state government has no direct bearing on the auditor's decision to extend substantive tests. Option B is not necessarily a reason to extend substantive tests, as higher payroll expenses may be attributable to other factors such as promotions, raises, or changes in benefits. Option D may raise suspicions about the fairness of overtime distribution, but it does not necessarily imply errors in payroll records that require substantive tests.

An Auditor Most Likely Would Extend Substantive Tests of Payroll