Planning - Analytical Procedures

Question 1

Basic premise underlying application of analytical procedure

Answer 1

plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary

Question 2

Use of analytical procedure is required to some extent

Answer 2

Required: risk assessment stage (planning), near audit completion (review)
Not required: as a substantive test

Question 3

Analytical procedure in review stage include

Answer 3

Consider unusual/unexpected acct balances not previously identified

Question 4

Most predictable for purpose of analytical procedures

Answer 4

Relationships involving

IS accts > Non discretionary accts > BS accts > Discretionary accts (affected by mgmt discretion)

Question 5

Analytical procedures show several accts have unexpected relationships means…

Answer 5

additional test of details required

Question 6

Entity IS were misstated due to unusual combination of exp and rev accts. These can be detected by auditor by

Answer 6

perform analytical procedure designed to disclose differences from expectations

Question 7

To be effective, analytical procedure near the end of audit should be performed by

Answer 7

manager/partner with comprehensive knowledge of client’s business and industry

Question 8

Analytical procedure most likely to be facilitated by

Answer 8

entity’s standard cost system that produces variance reports –> identify unusual fluctuation

Question 9

Ratio analysis

Answer 9

most common analytical procedure to develop relationships among BS accts

Question 10

Auditor considers withdrawing from engagement if

Answer 10

the discovery of small bribes from employees to public officials was not handled appropriately by mgmt
==> sign of pervasiveness
==> affect auditor’s ability to rely on mgmt representations