An auditor most likely would perform substantive tests of details on payroll transactions and balances when:

Question

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Choice "C" is correct. An auditor most likely would perform substantive tests of details on payroll transactions and balances when analytical procedures indicate unusual fluctuations in recurring payroll entries. Generally, an auditor can audit the payroll accounts utilizing mostly analytical procedures; however, if the results of such procedures indicate unusual fluctuations, the auditor would employ more persuasive, substantive tests of details. Choice "A" is incorrect. A substantial amount of accrued payroll expense would not necessarily cause the auditor to perform substantive tests of details on payroll transactions, since the balance may be effectively tested using analytical procedures. Choice "B" is incorrect. When the assessed level of control risk relative to payroll is low, the auditor would probably perform only analytical procedures to test the related balances. If control risk rose to a high level, then substantive tests of details would probably be utilized. Choice "D" is incorrect. Unpaid commissions may be tested effectively with analytical procedures.

An Auditor Most Likely Would Perform Substantive Tests of Details