CPA · Question 42 · Area III: Performing Procedures
An auditor is performing a 'search for unrecorded liabilities' and selects a sample of cash disbursements recorded in January (subsequent period). The auditor identifies a payment of $5,000 for utility services covering the period December 1 to December 31. The payment was recorded as an expense in January. The client's year-end is December 31. The materiality threshold is $10,000. What is the auditor's conclusion?
Answer options:
The treatment is correct because the cash was paid in January.
This is an unrecorded liability and a misstatement, but it may be waived if immaterial.
This is a material weakness in internal control.
The auditor must qualify the opinion.
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