Why will an auditor more extensively test controls for the completeness assertion on liability accounts than on asset accounts?
A) The risk of unrecorded liabilities is greater than the risk of unrecorded assets.
B) The completeness assertion is not applicable to asset accounts.
C) The liabilities account balances presented in the financial statements tend to be more complete than the asset accounts.
D) The most likely type of misstatement for liabilities is overstatements.

Question

Quizplus · Accepted Answer

Liabilities represent obligations that the entity owes to outside parties, such as suppliers, lenders, and employees. The risk of unrecorded liabilities is greater than the risk of unrecorded assets because companies have more control over the timing and amount of assets than liabilities. Therefore, auditors need to test more extensively the completeness assertion on liability accounts to ensure that all liabilities have been properly recorded. Additionally, the most likely type of misstatement for liabilities is understatements, which further justifies the need for extensive testing.

Why Will an Auditor More Extensively Test Controls for the Completeness