Question

If an auditor performs analytical procedures on rent expense and finds that rent expense has increased 50?

1) Test rent cutoff to determine if all rent has been recorded.
2) Vouch rent payments to underlying documents to determine that all vouchers have receiving reports.
3) Vouch larger items in rent expense in a search for unrecorded finance leases.
4) Perform tests of controls to ensure that all rent transactions are authorized.

Answer 1

An auditor can take several steps to investigate an increase in rent expense, including testing rent cutoff, vouching rent payments, vouching for larger items, and performing tests of controls.

Step-by-step explanation:

When an auditor performs analytical procedures on rent expense and finds that rent expense has increased by 50%, there are several steps they can take to investigate further:

1. Test rent cutoff: This involves examining the records to determine if all rent has been recorded in the correct period. It helps ensure that rent expenses have been accurately reported.
2. Vouch rent payments to underlying documents: This step involves verifying the rent payments by checking the receipts or invoices to ensure that all vouchers have received reports. It helps confirm the accuracy of the rent expense.
3. Vouch larger items in rent expense: In this step, the auditor examines larger items within the rent expense to search for any unrecorded finance leases. This helps identify any potential undisclosed financial obligations related to rent.
4. Perform tests of controls: The auditor may also perform tests of controls to ensure that all rent transactions are properly authorized. This helps assess the effectiveness of the internal controls related to rent expenses.