When performing substantive analytical procedures for notes payable, if actual interest expense is materially larger than the auditor's expectation, one possible cause would be interest payments on unrecorded notes payable.

Question

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This statement is true. If the actual interest expense is higher than expected, it could indicate the existence of unrecorded obligations, such as interest payments on unrecorded notes payable. This could lead to a material misstatement in the financial statements, so the auditor would need to investigate further.

When Performing Substantive Analytical Procedures for Notes Payable, If Actual