chap 8 perform preliminary analytical procedures

Question 1

in identifying areas of specific risk , the auditor is likely to focus on the ____ ___ ratios?

Answer 1

liquidity activity (inventory and A/R turnover)

Question 2

what is 2 preliminary analytical procedure

Answer 2

1.compare client ratios to industry or competitor benchmarks to provice an indication of the companys performance…these can reveal unuaual changes in ratios compared to prior years or to industry averages to identify areas with increased risk of misstatment. 2. use common size FSs for one or more years for comparison (what percentage of common base such as net sales)

Question 3

auditors are required to perform preliminary analytical procedures as part of ?

Answer 3

risk assessment procedures to better understand the clients business and industry and to assess client business risk

Question 4

the auditor should calculate ____ _____ account balances as a percentage of sales ehen the levels of sales has changed from a prior year

Answer 4

income statement