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    PracticeCPA®CPA AUD Practice ExamQuestion 54
    Medium1 markMultiple Choice
    Area 3: Performing ProceduresAUDPayrollAnalytical Procedures

    CPA · Question 54 · Area 3: Performing Procedures

    An auditor is testing the completeness of the payroll expense. Which of the following analytical procedures would be most effective?

    Answer options:

    A.

    Comparing the total payroll expense to the budget and prior year, adjusted for changes in the number of employees and pay rates.

    B.

    Vouching a sample of payroll checks to time cards.

    C.

    Tracing a sample of employees from the personnel file to the payroll register.

    D.

    Observing the distribution of paychecks.

    How to approach this question

    Analytical Procedure = Comparison/Expectation. Test of Details = Vouching/Tracing. Choose the Analytical one.

    Full Answer

    A.Comparing the total payroll expense to the budget and prior year, adjusted for changes in the number of employees and pay rates.✓ Correct
    Comparing the total payroll expense to the budget and prior year, adjusted for changes in the number of employees and pay rates.
    Analytical procedures involve evaluations of financial information through analysis of plausible relationships. Developing an expectation of payroll based on headcount and rates is a strong analytical test for reasonableness (completeness/occurrence).

    Common mistakes

    Selecting a Test of Details (Tracing) when the question asked for an Analytical Procedure.
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