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) recalculate the client's accruals.
B) compare the ledger balance with the journal and the tax form.
C) confirm the amount with employees.
D) compare the recorded accrued wages with the amount approved in the minutes of the Board.

Question

Quizplus · Accepted Answer

Since the company's policy for accruing wages is consistent with that of previous years, the auditor should focus on testing for the cutoff and accuracy of the accruals. Recalculating the client's accruals is an appropriate audit procedure to check for accuracy and ensure that the cutoff is appropriate. Comparing the ledger balance with the journal and tax form may assist in identifying discrepancies, but it is not specifically targeted at testing for cutoff and accuracy. Confirming the amount with employees would be time-consuming and not necessarily provide direct evidence of cutoff and accuracy. Comparing the recorded accrued wages with the amount approved in the minutes of the Board would only confirm that the amount was approved, but it does not provide evidence of whether the accrual was recorded accurately or whether the cutoff was appropriate.

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