Question

During the audit of Smithfield Muffins, the auditors tested purchase invoices to determine that invoiced amounts have been recorded appropriately. Which assertion was the auditor most likely addressing?

1) Classification
2) Cutoff
3) Rights and obligations
4) Accuracy

Answer 1

The auditor was addressing the accuracy assertion when testing purchase invoices, to confirm that the invoiced amounts were recorded appropriately in the financial statements.

Step-by-step explanation:

When an auditor tests purchase invoices to ensure that invoiced amounts have been recorded correctly, they are primarily addressing the accuracy assertion. This assertion concerns whether the amounts and other data related to recorded transactions have been recorded appropriately, in accordance to the Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS), depending on the jurisdiction of the company being audited. By testing whether the invoiced amounts are accurately recorded, the auditor is verifying that transactions are recorded in the correct amount and that all relevant information is appropriately included in the company's financial statements.