M7-Risk Assessment: Part 1

Question 1

Analytical procedures are evaluations of financial information made by a study of plausible relationships among data, and they include comparisons between current year and prior year financial information. (true or false)

Answer 1

true

Question 2

A requirement during planning is to perform analytical procedures, which involve comparisons of recorded amounts to expectations. (true or false)

Answer 2

true

Question 3

Analytical procedures used in planning the audit should focus on enhancing the auditor’s understanding of the client’s business and the transactions and events that have occurred since the last audit date. (true or false)

Answer 3

true

Question 4

Analytical procedures involve comparison of recorded amounts to independent expectations developed by the auditor. During the planning stage, analytical procedures generally use financial data, such as unaudited information from internal quarterly reports. (true or false)

Answer 4

true

Question 5

An auditor is most likely to perform a trend analysis of quarterly sales to identify unusual sales transactions. This is considered an analytical procedure. (true or false)

Answer 5

true

Question 6

During an economic downturn, it is more likely that customers will default on payments owed. The auditor should therefore focus increased attention on the allowance for doubtful accounts, to ensure that it has been adjusted to appropriately reflect this increased risk. (true or false)

Answer 6

true