Case 4 ( 2 points)

After testing accounts payable and other expenses balances. The auditor observes an unexpected increase in the account balance compared to the prior year, especially in the fourth quarter. The client happens to be walking by, so the auditor asks the client about the fluctuation. The client provided a reasonable explanation, the staff auditor directly documents it as evidence supporting the fluctuation. Later, it is determined that other facts encountered during the audit does not support the clients explanation.

The questions: -Do you think that the audit team did their job correctly?

-Is it possible that the client has purposely inflated the accounts payable and other expenses balances? If the clients did that on purpose what is this tactic called? What is the benefit from that?

-What should you do as an auditor to make sure that the balances are correct (at least 4 ways)?