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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
    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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