examMatrix061112 CPA Exam Challenge An auditor most likely would perform substantive tests of details on payroll transactions when: cutoff tests indicate a substantial amount of accrued payroll expense. the assessed level of control risk relative to payroll transactions is low. analytical procedures indicate unusual fluctuations in recurring payroll entries. accrued payroll expense consists primarily of unpaid commissions. The purpose of analytical procedures is to compare recorded amounts to expectations developed by the auditor (AU 329.05). In addition, AU 329.21 states, “In those cases when an explanation for the difference cannot be obtained, the auditor should obtain sufficient appropriate audit evidence about the assertion by performing other audit procedures.” If such procedures indicate unusual fluctuations in recurring payroll entries, the auditor then would perform substantive tests of details because the auditor expectations were not achieved.Substantial amounts of accrued payroll expense and unpaid commissions would be of concern to the auditor only if these amounts were unreasonable or unexpected. For a chance to win a Kindle Fire, sign up here:
