During the course of an audit, a CPA's substantive analytical procedure provides an expected interest expense that is significantly higher than the amount recorded in the entity's accounting records. This observation would most likely lead the auditor to suspect that:
A)the entity failed to record all debt.
B)discount on Bonds is misstated.
C)interest income is overstated.
D)the entity failed to record all interest expense.

Question

Quizplus · Accepted Answer

The significant difference between the expected interest expense and the recorded amount suggests that the entity may have failed to record all interest expense. Therefore, choice D is the most appropriate. The other choices do not align with the observation made by the CPA.

During the Course of an Audit, a CPA's Substantive Analytical