Once the auditor has determined the company's policy for accruing wages and knows it is consistent with that of previous years, the appropriate audit procedure to test for cutoff and accuracy is to:
A) compare the recorded accrued wages with the amount approved in the minutes of the board.
B) confirm the amount with employees.
C) recalculate the client's accruals.
D) compare the ledger balance with the journal and the tax form.

Question

Quizplus · Accepted Answer

The appropriate audit procedure to test for cutoff and accuracy of the accrued wages is to recalculate the client's accruals. This will ensure that the amount recorded includes wages earned up to the end of the accounting period and excludes any wages earned after the end of the accounting period. This will help to ensure the accuracy and completeness of the recorded accrued wages. Comparing the recorded accrued wages with the amount approved in the minutes of the board (A) is a relevant control procedure, but it does not specifically test for cutoff and accuracy. Confirming the amount with employees (B) may provide additional evidence, but it is not the best way to test for cutoff and accuracy. Comparing the ledger balance with the journal and the tax form (D) is a relevant test, but it may not specifically test for cutoff and accuracy.

Once the Auditor Has Determined the Company's Policy for Accruing